Patties Foods Ltd ABN 62 007 157 182 - ASX · Patties Foods Ltd ABN 62 007 157 182 ... despite...

Patties Foods Ltd ABN 62 007 157 182

Operations 161-169 Princes Highway Bairnsdale VIC 3875 PO Box 409 Bairnsdale VIC 3875 Phone: 03 5150 1800 Admin Fax: 03 5152 1135 Sales Fax: 03 5152 1054 [email protected] www.patties.com.au

Corporate Office Chifley Business Park Level 2, 1 Joseph Avenue Mentone VIC 3194 PO Box 115 Dingley VIC 3172 Phone: 03 8540 9100 Fax : 03 9551 3393 [email protected] www.patties.com.au

19 August 2013 Announcements Officer Company Announcements Office Australian Stock Exchange Limited South Rialto Tower 525 Collins Street MELBOURNE VIC 3000 Patties Foods Limited (PFL) - Results for announcement to the market - Year ended 30 June 2013 In accordance with the ASX Listing Rule 4.3A, the following information in respect of the year ended 30 June 2013 is transmitted for lodgement: 1. Year end report announcement 2. Appendix 4E - Preliminary Final Report and Dividend Announcement for the

year ended 30 June 2013; and 3. Directors’ Report and Financial Report for the year ended 30 June 2013. Yours faithfully

MICHAEL KNAAP Company Secretary

For further information refer to www.patties.com.au or contact:

Greg Bourke Managing Director 03 8540 9100

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http://www.patties.com.au/



2013 FINANCIAL YEAR RESULTS ANNOUNCEMENT

CORE BUSINESS OF BRANDED SAVOURY PRODUCTS CONTINUE TO GROW. WRITE-DOWN OF FROZEN FRUIT ASSETS.

The Board of Patties Foods Limited (PFL) today announced the Company’s financial result for the year ended 30 June 2013. Group summary result

$m FY2013 FY2012 % Change Sales Revenue $244.8 $235.8 3.8% EBITDA $34.0 $38.7 (12.2%) EBIT $14.5 $31.6 (54.2%) NPAT $4.8 $19.5 (75.4%) EPS (cents) 3.4 14.0 (75.7%) DPS (cents) 7.1 8.2 (13.4%) EBITDA – Underlying (1) $34.6 $38.7 (10.7%) EBIT – Underlying (1) $26.9 $31.6 (15.0%) NPAT- Underlying (1) $17.0 $19.5 (12.7%) EPS (cents) – Underlying (1) 12.2 14.0 (12.6%) Net Debt $68.0 $70.5 (3.5%) Cash Inflow from Operations $20.8 $9.4 121.3% Net Debt to Equity ratio 50.9% 51.8% Underlying Return on Equity (pa.) (2) 12.7% 14.7%

(1) FY13 reported profit adjusted for significant items of $12.404m pre-tax and $12.228k post-tax. This relates to a non-recurring bad debt ($587k Pre-tax and $411k post tax) and impairment of Frozen Fruit Business ($11.817m pre and post tax).

(2) Return on Equity is calculated using underlying NPAT and the average equity over the financial year. Net Profit After Tax (NPAT) for the year ending 30 June 2013 was $4.8m after taking a non-cash impairment charge of $11.8m against the Frozen Fruit intangible assets. The underlying NPAT of $17.0m is in line with the Board’s Earnings Update reported to the Australian Stock Exchange on 28 June 2013. Commenting on the results, PFL Chairman, Mr Mark Smith said: “The market leading branded savoury business continued growth in FY13 in challenging trading conditions. We remain focused on our strategy of supporting and growing our core brands through innovative new products, marketing campaigns and channel development. In June this year we announced a strategic review of our frozen fruit business which is continuing. Along side this review our periodic impairment testing process has resulted in the board recording an impairment of $11.8m in the value of the intangible assets of the frozen fruit business.” Managing Director, Mr Greg Bourke said, “Market conditions remain difficult and for the first time in 4 years, we have reported a decline in earnings.

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However, the core business of savoury brands continues to underpin the performance of the company. Volumes continue to grow strongly although incremental revenue was achieved at lower margins due to increased discounting levels, particularly in the In-Home (supermarket) channel. Our manufacturing result was disappointing as we did not meet our own high standards when commissioning the automated pie packing plant, despite other parts of the bakery performing well with good improvements in efficiencies.” Highlights for the year were:

• Increased market share in In Home and Out of Home savoury categories. • Out of Home sales growth from Petrol and Convenience channel and a key bakery

contract. • Selling, general and administration overheads under tight control. • Strong growth of Four’N Twenty and Patties brands.

Capital Management Net Debt reduced by $2.5m to $68.0m (30 June 2012 $70.5m) as a result of effective working capital management. This was a pleasing result considering capital expenditure of $9.8m (FY12 $9.7m) during the year. Total net cash flow generated from operating activities in FY13 was $20.8m, delivering a 121.3% increase on the previous corresponding period (FY12: $9.4m). Accordingly, the debt to equity ratio3 has improved to 50.9% at 30 June 2013 from 51.8% at 30 June 2012. Furthermore, interest cover4 remains strong at 6.7x (FY12: 6.5x). Dividend A fully franked final dividend of 3.9 cents per share (FY12: 4.4 cps) has been declared. The total dividend per ordinary share for FY13 is 7.1 cps representing an underlying pay-out5 ratio consistent with last year at 58% (FY12: 58%). The record date for entitlement is 17 September 2013 and the payment date is 8 October 2013. Outlook

Whilst we are in a period of challenging retail trading conditions, we remain committed to driving earnings growth from our underlying earnings in FY13 and building shareholder value through:

• Continuing to invest in our strategic growth initiatives, particularly the development of our core brands and new channels. These initiatives are an investment in the future and we expect to see the financial benefits over the next 2 to 3 years.

• Supporting and growing our core brands through innovative new products and consumer promotions;

• Achieving price increases across all channels to recover cost increases.

• Disciplined control of costs, and

• Improved manufacturing efficiencies, including the benefit of the completed automation packing equipment project during this calendar year.

For further information refer to www.patties.com.au or contact Greg Bourke, Managing Director on 03 8540 9100.

3 Debt to equity ratio is calculated as net debt vs. total equity. 4 Interest cover is calculated as underlying EBIT divided by interest. 5 Underlying pay-out ratio is calculated using underlying NPAT of $17.0m

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About Patties Foods

Patties Foods Limited (ASX:PFL) listed in November 2006 and is the leading Australian-owned branded frozen food company, with market leadership in the frozen savoury, frozen dessert and frozen fruit segments.

Iconic brands in the Patties Foods portfolio include Four’N Twenty, Herbert Adams, Nanna’s and Patties. PFL manufactures and markets quality food products for the supermarket, petrol & convenience, catering and general foodservice channels in all parts of Australia.

Four’n Twenty is Australia’s favourite pie. It is the number 1 branded range of pies in Australia across all retail markets including supermarkets and convenience stores. It is the number 1 selling pie at the footy being available at most major sporting venues in Australia.

Patties purchased the frozen fruit business in 2007 including the Creative Gourmet brand (available in most supermarkets) and Chef’s Pride (foodservice) brand. The Nanna’s frozen fruit range was launched in 2010. Patties has a market share of frozen fruit in supermarkets of 46% (MAT June 2013).

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Listing Rule 4.3A

Appendix 4E Preliminary Final Report Name of entity

Patties Foods Limited

ABN or equivalent company reference: ABN 62 007 157 182 1. Reporting period

Report for the financial year ended 30 June 2013

Previous corresponding period is the financial year ended 30 June 2012 2. Results for announcement to the market

A$’000

Revenue from ordinary activities (item 2.1) up 3.8% to 244,808 Earnings before interest, tax, depreciation & amortisation (EBITDA) down 12.2% to 33,977 Underlying Earnings before interest, tax, depreciation & amortisation (Underlying EBITA)

down 10.7% to 34,564

Earnings before interest and tax (EBIT) down 54.2% to 14,505 Underlying earnings before interest and tax (Underlying EBIT)

down 15.0% to 26,909

Net profit (loss) from ordinary activities after tax attributable to members (Item 2.2 & 2.3)

down 75.4% to 4,789

Underlying net profit (loss) from ordinary activities after tax attributable to members down 12.7% to 17,017

Dividends (item 2.4) Date paid / payable

Amount per security

Franked amount per

security

Interim dividend

Current reporting period 13 APR 2013 3.2¢ 3.2¢

Previous corresponding period 13 APR 2012 3.8¢ 3.8¢

Final dividend

Current reporting period 8 OCT 2013 3.9¢ 3.9¢

Previous corresponding period 8 OCT 2012 4.4¢ 4.4¢

Record date for determining entitlements to the final dividend (item 2.5): 17 September 2013

Brief explanation (item 2.6): Please refer to the commentary in the operating and financial review section of the directors’ report and the 2013 Financial Year Results Announcement accompanying this Preliminary Final Report.

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3. Statement of financial performance: see attached Financial Report 4. Statement of financial position: see attached Financial Report 5. Statement of cash flows: see attached Financial Report 6. Total dividend on all securities paid or payable in period

Current period $A’000

Previous corresponding period - $A’000

Interim Dividend Paid $4,451 $5,281

Final Dividend Payable $5,424 $6,116 7. There is currently no dividend reinvestment plan in place 8. Statement of retained earnings: see attached Financial Report 9. Net tangible assets per security

Current period Previous corresponding period

Net tangible asset backing (per share) $0.46 $0.41

Net asset backing (per share) $0.94 $0.98 10. Details of entities over which control has been gained or lost Not Applicable 11. Share of net profit/(loss) after tax from associates

% Holding 2013 A$’000

2012 A$’000

Davies Bakery Pty Ltd 50% $1,722 $1,140

Piper Partners Pty Ltd 50% ($7) ($12) The share of net profit/(loss) after tax from associates is included in the net profit after tax disclosed above for the Group.

12. Other Significant Information All significant information is disclosed in this appendix and its attachments 13. Foreign Entities accounting standards Not Applicable 14. Commentary on results for the period

Please refer to the commentary in the operating and financial review section of the director’s report and the 2013 Financial Year Results Announcement accompanying this Preliminary Final Report.

15. Audit of the financial report The financial report has been audited by PricewaterhouseCoopers and an unqualified audit opinion is in the attached Financial Report. F

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Patties Foods Limited62 007 157 182ABN

Annual report30 June 2013year endedfor the

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62 007 157 182ABNPatties Foods Limited30 June 2013-Annual report

ContentsPage

Directors' report 1Corporate governance statement 31Financial statements 40Independent auditor's report to the members 91

informationShareholder 93

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Patties Foods LimitedCorporate directory

Directors ChairmanSmith,Mark G

Managing DirectorBourke,Gregory J

Deputy ChairmanLeonard,J Curt

Gregory J Dhnaram

Henricus J Rijs

Richard C Rijs

John P Schmoll

Secretary Michael D Knaap

Principal registered office in Australia 161-169 Princes Highway3875VicBairnsdale

Australia1800 650 069

Share and debenture register Computershare Investor Services Pty LtdYarra Falls, 452 Johnston Street

3067VicAbbotsford1300 787 171

Auditor PricewaterhouseCoopersFreshwater Place2 Southbank Boulevard

3006VicSouthbank

Solicitors Minter Ellison525 Collins Street

3000VicMelbourne

Bankers Westpac Bank LimitedLevel 10, 360 Collins Street

3000Melbourne

Stock exchange listings Patties Foods Limited shares are listed on the AustralianStock Exchange.ASX Code: PFL

Website www.patties.com.au

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Patties Foods LimitedDirectors' report

30 June 2013

Directors' report

consisting ofGroup)present their report on the consolidated entity (referred to hereafter as thedirectorsYour(referred to hereafter as the Company) and the entities it controlled at the end of, or during,Patties Foods Limited

2013.30 Juneyear endedthe

DirectorsGregory J BourkeGregory J DhnaramJ Curt LeonardHenricus J RijsRichard C RijsJohn P SchmollMark G Smith (appointed 22 April 2013)

until his resignation on 22 Aprilfinancial yearfrom the beginning of thedirectorChristopher J Riordan was a2013.

Principal activitiesconsisted of the manufacture and marketing ofGroupthe principal continuing activities of theyearDuring the

frozen food products.

Dividends - Patties Foods Limitedwere as follows:financial yearDividends paid to members during the

2013$'000

2012$'000

Final ordinary dividend for the year ended 30 June 2012 of 4.4 cents (2011-4.2cents) per fully paid share paid on 8 October 2012 6,116 5,838Interim ordinary dividend for the year ended 30 June 2013 of 3.2 cents (2012-3.8cents) per fully paid share paid on 13 April 2013 4,451 5,281

10,567 11,119

In addition to the above dividends, since the end of the financial year the directors have recommended thepayment of a final dividend of $5,424,000 (3.9 cents per fully paid) share expected to be paid on 8 October 2013.The dividend will be fully franked. Total dividends for FY2013 are therefore 7.1 cents per share (FY2012: 8.2cents per share).

Significant changes in the state of affairsyear.during the financialGroupThere were no significant changes in the state of affairs of the

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30 June 2013(continued)

Matters subsequent to the end of the financial yearthat has significantly affected, or may30 June 2013No other matter or circumstance has arisen since

significantly affect:(a) oryears,financialoperations in futureGroup'sthe(b) oryears,financialthe results of those operations in future(c) years.financialstate of affairs in futureGroup'sthe

Environmental regulationThe Group is a signatory to the Australian Packaging Covenant. Its sites are all compliant with EPA and otherrelevant governmental environmental targets and regulations. The Group is subject to environmental regulation inrespect of its manufacturing activities as set out below.

In Victoria, the Group holds environmental licences for its manufacturing site. These licences require dischargesto air and water to be below specified levels of contaminants, and solid wastes to be removed to an appropriatedisposal facility. These requirements arise under the Environmental Protection Authority's regulations Clean AirAct 1961, Clean Waters Act 1970, Pollution Control Act 1970, Noise Control Act 1975, the EnvironmentallyHazardous Chemicals Act 1985 and Waste Avoidance and Resource Recovery Act 2001.

The Group is subject to the reporting requirements of both the Energy Efficiency Opportunities Act 2006 and theNational Greenhouse and Energy Reporting Act 2007.

The National Greenhouse and Energy Reporting Act 2007 requires the Group to report its annual greenhousegas emissions and energy use. The Group has implemented systems and processes for the collection andcalculation of the data required and submitted its 2011/12 report to the Greenhouse and Energy Data Officer on24 October 2012.

The directors are not aware of any breaches to the environmental requirements and are not aware of anyinfringement notices or fines being issued during the year.

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Operating and financial reviewOperating Information and Underlying Drivers of Performance

$m FY2013 FY2012 % ChangeSales Revenue $244.8 $235.8 3.8%EBITDA $34.0 $38.7 (12.2%)EBIT $14.5 $31.6 (54.2%)NPAT $4.8 $19.5 (75.4%)EPS (cents) 3.4c 14.0c (75.7%)DPS (cents) 7.1c 8.2c (13.4%)EBITDA – Underlying $34.6 $38.7 (10.7%)EBIT – Underlying $26.9 $31.6 (15.0%)NPAT- Underlying $17.0 $19.5 (12.7%)EPS (cents) – Underlying 12.2c 14.0c (12.6%)Net Debt (1) $68.0 $70.5 (3.5%)Net Cash inflow from operatingactivities $20.8 $9.4 121.3%Net Debt to Equity ratio 50.9% 51.8%Underlying Return on Equity (pa.) (2) 12.7% 14.7%

(1) Net Debt is borrowings less cash and cash equivalents.(2) Return on Equity is calculated using underlying NPAT and the average equity over the financial year.

Profit from continuing operations is referred to as Net Profit After Tax (NPAT). NPAT for the year ending 30 June2013 was $4.8m after taking a non-cash impairment charge against the Frozen Fruit intangible assets ($11.817mpre and post tax) and a non-recurring bad debt ($0.587m pre-tax and $0.411m post tax). These two items areadded back to NPAT to reconcile to underlying NPAT. The underlying NPAT of $17.0m is in line with the Board’sEarnings Update reported to the Australian Stock Exchange on 28 June 2013 and represents a reduction of$2.5m or 12.7% on last year.

SalesThe Group sales increased by 3.8% or $9.0 million from the previous corresponding year, to $244.8m. Theprincipal sales' trends evident in the current year were (with the first two below having the greatest impact):• The branded savory business continued to grow with the core brands of Four n’ Twenty and Pattiesexperiencing good growth.• The In Home and Out of Home savoury categories all increased in market share strengthening our marketleader positioning in that category.• The Out of Home channel continues to grow with the annualised benefit of the Brumbies and BP contracts andthe growth in the Petrol and Convenience channel.• Incremental revenue was achieved in the In Home channel at lower margins due to the increased discountinglevels.• New contracts and increased ranging drove growth in the In Home private label volumes.• Whilst maintaining market leading position in the Fruit Pie category we reduced revenue as the categorydeclined.• The frozen fruit category remains challenging with the trend from consumers to shop for lower priced productsreducing the sales of premium Creative Gourmet products, whilst private label and Nanna’s is increasing marketshare. This trend causes margin compression in the category.

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(continued)Operating and financial reviewProfitProfit before income tax expense and finance costs is referred to as earnings before interest and tax or EBIT.EBITDA is EBIT with depreciation and amortisation added back. Underlying EBIT (which adds back the two itemsabove) was $26.9m, a reduction of $4.7m or 15% on last year.

The primary influences on the profit result are outlined below:• A reduction in gross profit (revenue from continuing operations less cost of sales of goods) of $3.1 million to$86.6 million impacted by margin compression whilst being partially offset with sales volume growth. Therespective contributions of each of these factors was unfavourable $6.2m and favourable $3.1m.• The contraction in gross profit resulted from many factors including capturing value segment opportunities atless than average margins, increased competitor activity, In Home supermarket channel discounting andmanufacturing performance inhibited by the commissioning of automation.• Total operating expenses increased only 2.0% to $52.0 million notwithstanding an increase in logistics andmarketing spend to support revenue growth and investment to develop strategic initiatives. This indicates acontinuation of effective cost control.• An impairment cost of $11.8 million (pre and post tax) was recorded against the Frozen Fruit intangible assetsand reflects the difficult trading conditions prevailing in the Frozen Fruit category. In June the Group announced astrategic review of our frozen fruit business which is continuing.• Finance costs declined $0.9m reflecting the improved average cost of funds through reduced margin andgeneral interest rates.

Financial Position

DividendsThe total dividends to shareholders for the year was 7.1c consisting of an interim dividend of 3.2c and finaldividend of 3.9c. All dividends were fully franked.

This results in a dividend payout ratio of 58% (FY12: 58%) which is in line with current company policy.

The FY13 fully franked dividend of 7.1c per share is a reduction on last year (8.2c) of 13.4% which is broadly inline with underlying NPAT reduction whist delivering a stable dividend payout ratio.

Cash Generation and Capital ManagementTotal net cash flow generated from operating activities in FY13 was $20.8m, delivering a 121.3% increase on theprevious corresponding period (FY12: $9.4m). The main contributing factor was a stable working capitalrequirement enabling strong conversion of earnings to cash.

The cash outflow from investing activities declined by $1.2 million on last year primarily due to the sale of landwhilst maintaining comparable investment in plant and equipment to support the manufacturing cost reductionprogram and maintenance capital expenditure requirements.

Furthermore there was a significant increase in cash outflow from financing activities as we reduced debt andsupport the dividend payments.

The debt to equity ratio has improved to 50.9% at 30 June 2013 from 51.8% at 30 June 2012 as a result ofreduced net debt of $2.5m however was offset with a net asset reduction of $3.7m due to an impairment of thefrozen fruit business. Furthermore, underlying interest cover remains strong at 6.7x (FY12: 6.5x).

External Financing FacilitiesThe Group retains external bank financing capacity totalling $85 million through a facility with Westpac Bank.These facilities mature in January 2016 and are sufficient to meet the organic operational and investment needsof the Group.

The banking covenants are comfortable and there are strong internal controls to ensure compliance withcovenants and internal financial ratio policy thresholds.

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(continued)Operating and financial reviewBusiness Strategies and Prospects for Future Financial Years

Having implemented the first phase of the Group’s Strategic Framework by 'building the base', the Group arefocused on optimising the second phase of 'developing and growing' the business, and transitioning into the thirdphase - 'expand and extend'. The purpose of this final phase is to expand the business into new channels andextend our products outside our traditional product portfolio. The Group have a number of strategies, some ofwhich are underway, to execute this phase.

New ChannelsThe Group will work with new domestic customers, in new distribution channels, who may not have consideredour products as part of their consumer offer.

Increase Product RangeInnovation through new products offerings in our core savory brands is a focus and new products in theentertainment and dessert categories manufactured locally or offshore are opportunities for growth. Sourcingproducts from around the world to market under our strong brands that are trusted by consumers for quality tastyand convenient products will provide good future growth.

AcquisitionsThe Group recognises that we can add value to other businesses by unlocking their potential through our strongcustomer relationships, consumer insights, efficient production processes and brand management experience.The Group will continue to identify opportunities for an acquisition which will add value to our business, as well asthe acquired business by maintaining a disciplined approach with clear criteria.

Brand SupportThe Group remains committed to investing in our brands. Through innovative new products and strong consumercommunications, the Group will expand and extend our brands to reach more consumers.

Reducing Manufacturing CostsThe Group remains focused on building manufacturing efficiencies. The Group have achieved improvements inoperations through the skill and dedication of our people and our leaders across the business, but there is moreto be achieved. Our continuous improvement projects continue to provide efficiencies. The manufacturing teamswork collaboratively to identify and implement many small improvements that collectively add up to good costreductions. A diligent focus on minimising factory overhead costs continues to assist improvements in conversioncosts.

The Group will continue to reduce:• costs of production through Continuous Improvement; and• unit costs through fractionalisation of fixed costs by building revenues with minimal incremental costs.

The Group continues with the long held policy of investing in state-of-the-art manufacturing equipment and aftersignificant investments in upgraded production equipment over recent years, the latest technology of roboticpacking equipment has been installed and commissioned. Management will continue to identify capitalexpenditure projects that provide a strong return on investment, thereby reinvesting in our manufacturingcapability to strive for world's best practice.

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(continued)Operating and financial reviewOperational Risks

The Group believes that there is a need for formal policies on risk management and accordingly, theGroup has systematic processes in place to identify, assess, manage, monitor and report the material businessand financial risks.

The risk management framework, assessments thereof and responses thereto are reviewed both individually andcollectively by the Audit and Risk Committee, Board and senior management.

A simple prioritisation system has been adopted to scale the relative importance of the identified risks. Thoserisks that are considered 'very high' are prioritised for mitigation actions, and are the material business risks facedby the company that are likely to have an effect on the financial prospects and regulatory compliance of theGroup. The risk identified as high at the most recent assessment is detailed below, including how the companymanages this risk:

• A change in the competitive environment impacting profitability: The competitive landscape is increasing, andhaving the lowest cost of doing business is a key source of maintaining a competitive advantage, together withquality of brands. Accordingly we continue to focus on:- maintaining a cost efficiency advantage over our competitors; and- innovation and customer needs through market research, advertising campaigns, product development andpackaging innovation.

Outlook

Whilst we are in a period of challenging retail trading conditions, we remain committed to driving earnings growthfrom our underlying earnings in FY13 and building shareholder value through:• Continuing to invest in our strategic growth initiatives, particularly the development of our core brands and newchannels. These initiatives are an investment in the future and we expect to see the financial benefits over thenext 2 to 3 years.• Supporting and growing our core brands through innovative new products and consumer promotions.• Achieving price increases across all channels to recover cost increases.• Disciplined control of costs, and• Improved manufacturing efficiencies, including the benefit of the completed automation packing equipmentproject during this calendar year.

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Information on directorsNon-Executive Chairman (appointed 22 April 2013).FAMI CPM FAIM FAICDMark G Smith

Experience and expertiseExtensive global experience in the Manufacturing and FMCG sectors across Australasia, USA, UK and AsiaPacific.Managing Director of Cadbury Schweppes Australia and New Zealand from 2003-2007. Over a 16 year careerwith the Cadbury Schweppes group, held senior management positions in Australia, the UK and North America.Past Chairman of Manassen Foods Group.Senior marketing management positions with Unilever and Uncle Toby's.

Other current directorshipsNon-Executive Director of Toll Holdings since 2007Non-Executive Director of GUD Holdings since 2009

Former directorships in last 3 yearsNone.

Special responsibilitiesChairman of the BoardChairman of the Remuneration and Nomination Committee

Interests in sharesNil.

Non-Executive Director and Deputy ChairmanBMktg & Bus. Admin, MBAJ Curt Leonard

Experience and expertiseNon-executive director since 2003.Over 31 years experience working with the Mars Group, including General Manager of Mars Confectionery,Managing Director of Uncle Bens and Managing Director of Mars Australia and New Zealand.Served as President, Asia Pacific, of all Mars business and Director of the Managing Board of Mars Incorporatedglobal business.

Other current directorshipsNone.

Former directorships in last 3 yearsNon-executive director of Select Harvests Limited (2004-2008).Chairman of Select Harvests Limited (2008-2012).

Special responsibilitiesDeputy Chairman of the BoardMember of Remuneration and Nomination Committee

Interests in shares2,175,351 ordinary shares in Patties Foods Limited.

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(continued)Information on directorsDirector.ManagingBBus, CPA, MBA, AICDGregory J Bourke

Experience and expertiseOver 30 years experience in finance and general management executive roles including 20 years at GeorgeWeston Foods Ltd in Australia and New Zealand, serving as Chief Financial Officer of Don's Smallgoods,Southern Regions General Manager Weston Milling Australia and Group General Manager of Weston MillingNew Zealand.

Other current directorshipsDavies Bakery Pty Ltd.Australian Food and Grocery Council

Former directorships in last 3 yearsNone

Special responsibilitiesManaging Director.

Interests in shares70,000 ordinary shares in Patties Foods Limited.

Non-Executive DirectorGregory J Dhnaram

Experience and expertiseCurrently Chief Executive Officer of Favco Group.30 years experience with a major Australian supermarket chain, including a number of senior positions at bothState and National levels.Extensive experience in buying, marketing, operations, strategic planning and all aspects of retail.

Other current directorshipsNon-executive director of Citrus Australia Limited.

Former directorships in last 3 yearsNone.

Special responsibilitiesMember of Audit and Risk Committee.


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(continued)Information on directorsNon-Executive DirectorHenricus J Rijs

Experience and expertiseA director since 1989.A son of the founders of Patties Foods Ltd, Harry joined the family business in 1972 as an apprentice pastry cookand gained hands-on experience in the Baking industry.Over his four decades at Patties, he gained broad experience in manufacturing, selling, marketing anddistribution and held senior management positions in these areas, including sales and marketing manager anddeputy managing director.Resigned as Executive Director and appointed Non-executive director on 1 July 2011.

Other current directorshipsDavies Bakery Pty LtdChairman of the Committee for Gippsland

Former directorships in last 3 yearsNone

Special responsibilitiesMember of Audit and Risk Committee.


Non-Executive DirectorRichard C Rijs

Experience and expertiseManaging Director from 1989 to 2007. Led the company through several successful acquisitions, culminating inthe purchase and integration of the Four 'N Twenty Pastry business. Was responsible for development of thestate of the art plant which saw Patties becoming the largest savoury pastry manufacturer in Australia.A son of the founders of Patties Foods, joining the business in 1971, working in all aspects of production,packaging, dispatch, sales and distribution.

Other current directorshipsChair of Lindenow Valley Water Security CommitteeChair of East Gippsland Marketing Board

Former directorships in last 3 yearsDavies Bakery Pty Ltd.

Special responsibilitiesMember of Remuneration and Nomination Committee.


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(continued)Information on directorsNon-Executive DirectorBComm, FCA, FAICDJohn P Schmoll

Experience and expertiseMr. Schmoll completed his executive career on his retirement in 2002 as Chief Financial Officer of Coles MyerLtd. Prior to this he held senior corporate and professional roles in Australia and South Africa including ArthurYoung and Edgars Stores Ltd (South Africa’s largest apparel and home wares retailer). Since his retirement hehas accepted various non-executive director positions and undertaken some executive coaching roles.Accordingly he brings to Patties over 35 years of experience in finance, investor relations, information technologyand corporate governance, primarily in the distribution and financial sectors.

Other current directorshipsNon-executive Chairman of Oroton Group Limited.Non-executive Director of Breville Group Limited.

Former directorships in last 3 yearsNon-executive Director of AWB Limited.

Special responsibilitiesChairman of Audit and Risk Committee.


Company secretaryMichael Knaap was appointed as company secretary of Patties Foods Ltd (PFL) with effect from 29 February2012. Michael has held the position of Chief Financial Officer at PFL since 16 February 2009.

Meetings of directorsyearand of each board committee held during thedirectorsboard ofCompany'sThe numbers of meetings of the

were:directorand the numbers of meetings attended by each2013,30 Juneended

Full meetings Meetings of committeesof directors

Audit and RiskRemuneration and

NominationA B A B A B

Mark G Smith (appointed22 April 2013) 2 2 * * 1 1Chris J Riordan (resigned22 April 2013) 13 13 * * - -J Curt Leonard 13 15 * * 1 1Gregory J Bourke 15 15 * * * *Gregory J Dhnaram 15 15 4 4 * *Henricus J Rijs 15 15 4 4 * *Richard C Rijs 15 15 * * 1 1John Schmoll 13 15 4 4 * *

A = Number of meetings attendedheld office or was a member of the committee duringdirectorB = Number of meetings held during the time the

yearthe* = Not a member of the relevant committee

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Remuneration report2013.30 JuneThe directors present the remuneration report for the year ended

The information provided in this remuneration report has been audited as required by section 300A of the2001.Corporations Act

Voting and comments made at the Group's 2012 Annual General MeetingThe Annual General Meeting was held on 22 November 2012 and for the purposes of section 250R(2) of the Act,

was adopted without question or30 June 2012the Group's Remuneration Report for the financial year endedcomment.

Summary of key amendments for FY2013As part of the Board's ongoing strategic review of remuneration arrangements, policy and practice in earlyFY2013, there were three key amendments to executive remuneration arrangements:

• To further align the Short-term Incentive Plan (STIP) structure with the annual performance of the Group,the Board decided that for FY2013 a threshold level of Group EBIT financial performance for the full yearmust be achieved before any payment can be made under the STIP. The opportunity to earn part of theSTIP based on the first half-year performance to 31 December was therefore removed.

• A grant was made under the long term incentive plan (2013 LTIP) to senior executives. This was the firstgrant since the initial grant in FY2010.

• In November 2012, at the Annual General Meeting, shareholders approved the giving of benefits inconnection with certain types of termination from office or position of employment in the Company to theManaging Director and specified senior executives.

Further details of these changes are provided in this report.

Remuneration governanceThe Board reviews its executive remuneration policy and practices on a regular basis. The objectives of theBoard’s executive remuneration policy are to:

• align senior executive reward with the achievement of the strategic objectives of the Group and thecreation of value for shareholders;

• align the reward for senior executives with the performance of the Group;• ensure senior executive remuneration is competitive to retain and attract talented people; and• ensure that the elements of reward related to performance are appropriate for the results delivered.

The Remuneration and Nomination Committee (Committee) assists the Board by providing advice in relation tothe remuneration packages for key management personnel, which includes non-executive directors and specifiedsenior executives. The Committee’s Charter is available on the Group’s website. The Committee receives bothinternal and external advice to assist it in the review and decisions relating to remuneration.

In FY2013 the Committee received advice from Ernst & Young (E&Y) as its independent advisor to assist it inreviewing the long-term incentive plan for the senior executives. The process for the appointment of E&Y and theprovision of its advice to the Committee were in accordance with the Act in relation to remunerationrecommendations for key management personnel (ss. 206K and 206L). For the year ended 30 June 2013 E&Ywas paid a fee of $35,945.50 plus GST for the provision of remuneration advice. In addition, E&Y was paid a totalfee of $43,490 for work relating to Group income tax services.

The Board is satisfied that the governance arrangements it has established enable E&Y to deliver their advicefree from undue influence. These include:

• The request for advice was made directly to E&Y by the Chairman of the Committee after approval wasprovided by the Board.

• The advice received from E&Y was provided directly to the Chairman of the Committee.

The Corporate Governance Statement provides further information on the role of the Committee and theengagement of remuneration consultants.

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(continued)Remuneration reportKey management personnelIn addition to the non-executive directors, listed on page 1 of the Directors' Report, the following seniorexecutives are members of the Patties Leadership Team (PLT) and are regarded as the key managementpersonnel of the Group who have authority and responsibility for planning, directing and controlling the activitiesof the Group.

Name Role Date Commenced In Role

Current Senior ExecutivesG Bourke Managing Director 23 September 2008M Knaap Chief Financial Officer & Company Secretary 16 February 2009M Connolly (1) General Manager Marketing 1 January 2008G Leyden General Manager Manufacturing 23 February 2009T Peters Head of Sales 11 January 2010J Pentney General Manager People & Organisation 4 February 2008M Kluver General Manager Logistics & Customer Service 1 October 2010

(1) M Connolly resigned from the company effective 28 June 2013.

Senior executive remunerationThe remuneration for senior executives who are key management personnel is structured with a combination ofthe following three components:

• total fixed remuneration (TFR);• short-term incentive (STI); and• long-term incentive (LTI).

The Committee reviews senior executive remuneration annually taking into account Group performance, seniorexecutive performance and comparative information from other listed companies in similar industries and thebroader market.

The sustainability of Group performance and responsible remuneration practices remain key objectives of theCommittee. Another objective is that each senior executive's total remuneration will be market competitive andreflective of performance. In addition, the Committee monitors and reviews the remuneration structure for seniorexecutives to ensure the continued alignment and balance between Group performance, potential reward andGroup long term strategies.

The Committee and the Board believe that the Group’s remuneration policy continues to be appropriate to guidethe remuneration arrangements for senior executives. The Board remains focused on providing a strongalignment between the performance of the Group and the potential rewards received by senior executives. Toensure this continued alignment, in FY2013 the Committee completed a review of both the STI and the LTI plans,including receiving advice from the independent advisor on the LTI plan. The Committee made recommendationsfor amendment to both plans to the Board, which the Board approved. These amendments did not change theGroup remuneration policy, but strengthened the focus on the strategic alignment for FY2013 and beyond.Information on these amendments is provided in this report.

Total fixed remuneration (TFR)Total Fixed Remuneration (TFR) includes base salary, superannuation and other fixed benefits. Each year theCommittee reviews the performance and TFR for the Managing Director and the Managing Director reviews theperformance and TFR for other senior executives and provides the Committee with any recommendations foradjustments.

Senior executives may elect to sacrifice some of their base salary to increase payments towards superannuationor to salary package a motor vehicle.

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(continued)Remuneration report(continued)Senior executive remuneration

Short-term incentive plan (STIP)Senior executives may receive a specified percentage of their TFR in a performance linked short-term incentiveplan (STIP). Potential payments under the STIP are based on achievement of key performance measures, beingFinancial, Business Process Improvement, Customer and People measures. These measures are regarded bythe Board as the key drivers of trading performance. A threshold level of Group financial performance must beachieved for any payment to be made under the STIP.

To further align the STIP structure with the creation of shareholder value and the annual performance of theGroup, the Board decided that for FY2013 a threshold level of Group EBIT financial performance for the full yearmust be achieved before any payment can be made under the STIP. The opportunity that existed in FY2012, toearn part of the STIP based on the first half-year performance to 31 December was therefore removed.

Under the STIP, the Managing Director may receive an incentive payment of up to 25%, with other members ofthe PLT being able to receive an incentive payment of up to 18% of TFR. Other senior managers may achieve upto 10% of their TFR if all key performance measures are achieved.

The threshold level of Group EBIT financial performance for FY2013 was not achieved and as such there wereno STIP payments to Senior Executives in FY2013 as detailed on pages 21 to 23.

Long-term incentive plan (LTIP)The Board considers that a LTIP is an important component of the remuneration structure for senior executives,which aligns them with the strategy and long-term performance of the Group.

The LTIP was approved by the Board of Directors in 2006 prior to the Group’s listing on the ASX. Details of theLTIP were contained in the Prospectus. At the commencement of FY2013 the Board reviewed the structure of theLTIP as no grant had been made to senior executives since FY2010. In undertaking this review, the Boardreceived advice from Ernst & Young as their independent advisor. In addition, the Board considered:

• the future strategy for the Group;• the key measures to align achievement of long term performance, creation of value and the reward to

executives;• changes in market practice and legislation that have impacted on the design of equity plans; and• the establishment of a strong market peer group against which performance may be assessed.

Under the LTIP, the Board continues to have the discretion to grant options or rights to eligible employees toacquire ordinary shares in the Group subject to such terms and conditions, including vesting conditions whichinclude time and / or performance conditions and exercise price (in relation to options), as the Board determinesat its discretion.

Long-term incentive plan 2014 (2014 LTIP)For the FY2014 LTIP, the Board has concluded that the use of Performance Rights remains the most effectiveon-going long term incentive for senior executives. The Board has maintained the relative TSR PerformanceHurdle and the EPS Performance Hurdle which provides the right balance between relative and absolutecompany performance and alignment of executives’ and shareholders’ interests.

Key features of the FY2014 Grant are;

1. Consideration for the Rights - the Performance Rights will be granted for nil consideration;2. Vesting Period - the total grant will vest on the third anniversary of the grant date based on the

performance period 1 July 2013 to 3 June 2016;3. Performance Hurdles - vesting of the Performance Rights is dependent on two discrete performance

measures:• Earnings per Share (EPS) representing 50% of the total grant; and• Relative Total Shareholder Return (TSR) representing 50% of the total grant.

4. Vesting Schedule

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(continued)Long-term incentive plan 2014 (2014 LTIP)4.1 EPS Vesting Schedule -

EPS (basic earnings per share on a normalised basis) performance of the Group will be measured ona compound annual growth in EPS of the Group over the relevant 3 year Performance Period statedas a percentage (EPS Growth Percentage). The EPS performance measures as determined for theFY2013 grant will apply for the FY2014 grant.

4.2 TSR Vesting Schedule -For the FY2014 grant, the Board has reviewed the comparator group for the TSR performance hurdle.The comparator group has been expanded to include selected companies within the “Hotels,Restaurants and Leisure” and the “Personal Products” GICS Sector, based on the size of thosecompanies relative to the Company's current market capitalisation. The new comparator group isintended to focus senior executives on the company’s growth strategy in an expanded industry group.The terms of the grant of Performance Rights for the Managing Director will be presented to theAnnual General Meeting in November 2013 for approval by shareholders.

Long-term incentive plan 2013 (2013 LTIP)For the 2013 LTIP, the Board adopted a transitional vesting approach for the initial grant. For the grant which wasmade during FY2013, a small proportion of the Rights (Tranche 1: 20%) may vest two years following the grantdate (based on performance from 1 July 2011 to 30 June 2014). The remainder (Tranche 2: 80%) may vest threeyears following the grant date (based on performance from 1 July 2012 to 30 June 2015).

The following table summarises the key features of 2013 LTIP:

Grant Date 3 September 2012(1)

Award Structure Performance Rights

Performance Measure The number of Performance Rights that vest is dependent on two discreteperformance hurdles:

• Earnings per Share (EPS) representing 50% of the grant; and

• Relative Total Shareholder Return (TSR) representing 50% of the grant.

Performance Periods Performance Rights may vest over two performance periods:

Tranche 1:

• 10% may vest based on EPS growth from 1 July 2011 to 30 June 2014

• 10% may vest based on relative TSR versus the peer group of the ConsumerStaples GICS Sector from 1 July 2011 to 30 June 2014

Tranche 2:

• 40% may vest based on EPS growth from 1 July 2012 to 30 June 2015

• 40% may vest based on relative TSR versus the peer group of the ConsumerStaples GICS Sector from 1 July 2012 to 30 June 2015

Earnings Per Share (EPS) Based on Cumulative Annual Growth Rate (CAGR) over the performanceperiod

Relative Total ShareholderReturn (TSR)

Measured against a comparator group utilising the Consumer Staples GICSSector – Food Products

(1) The grant of performance rights for the Managing Director was made on 22 November 2012 following approval byshareholders at the Annual General Meeting.

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(continued)Long-term incentive plan 2013 (2013 LTIP)The following table details the performance period, performance hurdles and vesting schedule for PerformanceRights which were granted in FY2013 under the 2013 LTIP:

Granted in: FY2013

Tranche 1 - Performance Period ending FY2014

EPS Growth over 3 years period (1 July 2011 - 30June 2014)

Proportion of total grant of Rights vesting

Less than 8% CAGR 0%

Equal to 8% CAGR 5%

Greater than 8% CAGR but less than 12% CAGR Proportionate vesting in a straight line between 5%and 10%

12% CAGR or greater 10%

Relative TSR against comparator group over 3year period (1 July 2011 to 30 June 2014)


Less than median 0%

Equal to median 5%

Greater than median but less than 75th percentile Proportionate vesting in a straight line between 5%and 10%

75th percentile or greater 10%

Tranche 2 – performance period ending FY2015

EPS Growth over 3 year performance period (1July 2012 – 30 June 2015)


Less than 8% CAGR 0%

Equal to 8% CAGR 20%

Greater than 8% CAGR but less than 12% CAGR Proportionate vesting in a straight line between 20%and 40%

12% CAGR or greater 40%

Relative TSR against comparator group over 3year performance period (1 July 2012 – 30 June2015)


Less than median 0%

Equal to median 20%

Greater than median but less than 75th percentile Proportionate vesting in a straight line between 20%and 40%

75th percentile or greater 40%

CAGR - cumulative annual growth rate

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(continued)Long-term incentive plan 2013 (2013 LTIP)The terms and grant of performance rights for the Managing Director was subject to approval by shareholderswhich was granted at the Annual General Meeting on 22 November 2012.

For future grants under the LTIP, it is expected that the vesting period will be no less than 3 years, with annualgrants being made to senior executives at the discretion of the Board.

Benefits in connection with Termination

On 22nd November 2012, at the Annual General Meeting, shareholders approved the giving of AcceleratedBenefits in connection with certain types of termination, excluding resignation or dismissal for cause, as well ason certain changes of control circumstance, from office or position of employment in the Group. This benefit mayapply to the Managing Director and specified senior executives and provides the Board with the ability toaccelerate the vesting of Rights. The number of Rights that may vest in these circumstances will be determinedby the Board in its discretion taking into account:

(a) the elapsed relevant performance period as at the date of cessation of employment; and(b) the extent to which the relevant performance hurdles have been satisfied as at the date of cessation.

The following table details the maximum potential vesting of Performance Rights under the Accelerated Benefitsapproved by shareholders:

Name Performance Rights

G Bourke 308,000

M Knaap 154,400

G Leyden 154,400

T Peters 154,400

J Pentney 77,200

M Connolly (1) 77,200

M Kluver 77,200

(1) M Connolly resigned from the company effective 28 June 2013, with all Performance Rights forfeited.

The Group may transfer shares on the exercise of any vested Performance Rights that the Managing Director orany specified senior executive may hold where the Board has determined that an Acceleration Event hasoccurred, even if the value of the associated Acceleration Benefit, when combined with their existing terminationbenefits (if any) exceeds their average annual base salary remuneration.

Long-term incentive plan FY2010 (2010 LTIP)The Board made two grants of options to specified senior executives under the LTIP on 2 December 2009 and tothe Managing Director on 25 November 2010 following approval by shareholders. Subsequent grants were madeto two senior executives who commenced as key management personnel in 2010. The final performance periodfor 2010 LTIP ended on 30 June 2013. The EPS hurdles for Tranches 1 and 2 were not achieved at the end ofFY2012 and FY2013 respectively, and therefore these options have now expired with no vesting havingoccurred.

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(continued)Long-term incentive plan FY2010 (2010 LTIP)The following table summarises the key features of 2010 LTIP:

Grant Date 2 December 2009(1)(2)

Strike Price The strike price is determined by calculating the volume weighted average price(VWAP) for the Group for the periods below.

• For options granted on 2 December 2009 it was calculated from 1 July 2009to 2 December 2009 with a value of $0.90;

• For options granted on 28 January 2010 it was calculated from 18 January2010 to 27 January 2010 with a value of $1.33.

• For options granted on 22 October 2010 it was calculated from 1 October2010 to 22 October 2010 with a value of $1.36.

Performance Hurdle Achievement of specified compound annual earnings per share growth (EPSGrowth). EPS is the base earnings per share on a normalised basis. The baseyear for determining the EPS Growth calculations is FY 2009 (8.5 cents).

Performance Periods Options may vest over two performance periods:

• Tranche 1: 50% based on EPS Growth over three consecutive years endingFY2012 (For options granted on 22 October 2010 performance period endsFY2013);

• Tranche 2: 50% based on EPS Growth over four consecutive years endingFY2013.

Vesting AccelerationEvents

Subject to any necessary shareholder approval that may be required, there arecertain vesting acceleration events on certain types of termination ofemployment (including retirement from office but excluding resignation ordismissal for cause, in which event options lapse) as well as on a Change ofControl of the Group.

(1) The grant date for T Peters, Head of Sales, was 28 January 2010.(2) The grant date for M Kluver, General Manager Logistics & Customer Services, was 22 October 2010.

Each option granted is for one ordinary share.

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(continued)Long-term incentive plan FY2010 (2010 LTIP)The following table provides details of the vesting schedule for options granted for the 2010 LTIP that wereassessed at the end of FY2013:

Granted in: FY2010


EPS Growth over 4 year period Proportion of options vesting

Less than 19.5% per annum 0%

Equal to 19.5% per annum 50%

Greater than 19.5% per annum but less than 23.5%per annum

Proportionate vesting in a straight line between 50%and 100%

23.5% per annum or greater 100%

Granted in: FY2011


EPS Growth over 3 year period Proportion of options vesting

Less than 12.7% per annum 0%

Equal to 12.7% per annum 50%

Greater than 12.7% per annum but less than 17.8%per annum

Proportionate vesting in a straight line between 50%and 100%

17.8% per annum or greater 100%

Service contractsThere are no service contracts with the directors. Senior executives who are key management personnel, areeach employed under an individual employment contract which includes standard terms and conditions ofemployment for the Group. There is no term on these arrangements and standard notice periods of three monthsapply (save for six months in the case of the Managing Director) and there are no termination entitlements otherthan statutory entitlements.

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(continued)Remuneration reportNon-executive director remunerationThe Constitution provides that the Group may pay directors a maximum amount of directors' fees determined bythe Group at the annual general meeting or, until so determined, as the Board resolves.

Non executive directors’ fees are determined within an aggregate directors’ fee pool limit. The maximum fee poolcurrently stands at $600,000 per annum, which was resolved by the Board in May 2006 and approved by theshareholders at the AGM on 21 November 2007.

Fees and payments to non executive directors reflect the demands which are made on, and the responsibilitiesof, the directors. Non executive directors receive an annual fee and do not participate in any Group incentiveplan. In addition, non executive directors (including the Chairman) may receive additional fees for participation inthe Audit and Risk Committee and the Remuneration and Nomination Committee. Non executive directors’ feesand payments are reviewed annually by the Board.

The Chairman's fees are determined independently to the fees of other non executive directors based oncomparative roles in the external market. The fees for the non-executive directors including the Chairman wereincreased by 3% from 1 September 2012. There was no increase to the aggregate fee pool.

The following provides a summary of the non-executive director annual fees (including superannuationcontributions):

Board Fees From 1 September 2012 Prior to 1 September 2012

Chairman 159,135 (1) $154,500

Directors $72,100 $70,000

Audit Committee Member Nil Nil

Remuneration and NominationCommittee Member

Nil Nil

Audit Committee Chair $10,815 $10,500

Remuneration and NominationCommittee Chair

$10,815(2) Nil

(1) Mr. Mark Smith was appointed to the role of Chairman of Patties Foods Limited on 22 April 2013 and receives a fee of$160,000 per annum.(2) A fee of $10,815 per annum applies following the appointment of Mr. Mark Smith to the role of Chairman of theRemuneration and Nomination Committee as from 22 April 2013.

Retirement allowances for directorsThere are no retirement benefit schemes for directors, other than statutory superannuation contributions. Someindividuals have chosen to sacrifice some of their remuneration to increase payments towards superannuation.

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(continued)Remuneration reportLinking group performance to executive remunerationThe following table provides a summary of underlying Group performance over the last five years. The underlyingGroup performance is used as the basis for executive reward. The reconciliation between reported profit and

3.underlying profit is disclosed in the Operating and financial review on page

Group financial performance

FY2009 FY2010 FY2011 FY2012 FY2013

Revenue $179.2m $196.9m $216.8m $235.8m $244.7mEBIT (underlying) $21.0m $26.8m $29.9m $30.8m $25.33mNPAT (underlying) $11.8m $16.8m $18.4m $19.5m $17.0m

Dividends Per Share 4.5 cents 6.5 cents 7.7 cents 8.2 cents 7.0 centsEPS (underlying) 8.1 cents 11.3 cents 13.2 cents 14.0 cents 12.2 cents

Share price at 30 June $0.68 $1.08 $1.71 $1.605 $1.40

- underlying results used in FY2009 - FY2013.

STIP paymentThe STIP is designed to align the reward for executives with the performance of the Group. Each year the Boardestablishes challenging performance targets as the basis of the STIP. The current STIP enables up to 100% oftarget STIP to be earned subject to the achievement of the full year results to 30 June 2013. As the thresholdlevel of Group EBIT financial performance was not achieved for FY2013, no payments have been made to seniorexecutives under the STIP for FY2013.

The following table provides the average percentage of maximum STIP payments made to the key managementpersonnel for each of the past five years.

FY2009 FY2010 FY2011 FY2012 FY2013STI % of Maximum 0% 87% 0% 25.5% 0%

Long-term incentive performanceThe 2010 LTIP provided for up to 50% of the options which were granted to vest subject to the pre-determinedEPS hurdle being achieved at the end of FY2012 (Tranche 1). The remaining 50% of the options were measuredagainst the pre-determined EPS hurdle for the four years to the end of FY2013 (Tranche 2).

The EPS hurdles for Tranches 1 and 2 of 2010 LTIP were not achieved at the end of FY2012, or FY2013respectively, and therefore these options have expired. An adjustment was made to the accounts in accordancewith the Accounting Standards in FY2012.

Under the 2013 LTIP, the Board adopted a transitional vesting approach for the initial grant. For the grant whichwas made during FY2013, a small proportion of the Rights (Tranche 1: 20%) may vest two years following thegrant date (based on performance from 1 July 2011 to 30 June 2014) and the remainder (Tranche 2: 80%) mayvest three years following the grant date (based on performance from 1 July 2012 to 30 June 2015). Details of

of this report.16these allocations are provided in the tables on page

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(continued)Remuneration reportSenior management remuneration mixThe following table shows the proportional weighting of each element of remuneration for each of the seniorexecutives based on target performance:

Name

Fixedremuneration

(%)Short Term

Incentive (%)

Long termIncentive

(%)(1)

2013 2012 2013 2012 2013 2012

G Bourke 76.1% 72.6% 19.0% 18.2% 4.9% 9.2%M Knaap 79.9% 76.4% 14.4% 13.7% 5.7% 9.9%M Connolly (2) 81.5% 79.0% 14.7% 14.2% 3.8% 6.8%T Peters 80.1% 78.9% 14.4% 14.2% 5.5% 6.9%G Leyden 79.1% 75.1% 14.2% 13.5% 6.6% 11.4%J Pentney 81.6% 79.2% 14.7% 14.3% 3.7% 6.5%M Kluver 81.0% 80.0% 14.6% 14.4% 4.5% 5.6%

(1) The LTIP value is based on the Total Accounting Value for FY2013.(2) Mr. Connolly resigned effective from 28 June 2013.

Remuneration tablesDetails of the remuneration of the key management personnel, including directors, and other specified executives(as defined in AASB 124 Related Party Disclosures) of the Group are set out in the following tables:

2013

Short-term employee benefits

Post-employmentbenefits

Long-term

benefits

Share-based

payments

Name

Cashsalary and

fees

Shortterm

incentive

Non-monetarybenefits

(1)Super-

annuation

Longserviceleave

Options/Perf.Rights Total

$ $ $ $ $ $ $Non-executive directorsChris J Riordan - Chairman(2) 131,838 - - - - - 131,838Mark Smith - Chairman (3) 28,417 - - 2,558 - - 30,975John P Schmoll 75,700 - - 6,813 - - 82,513Gregory J Dhnaram 44,419 - - 27,331 - - 71,750Richard C Rijs (4) 51,752 - - 19,998 - - 71,750J Curt Leonard 55,161 - - 16,589 - - 71,750Henricus J Rijs 46,926 - - 24,824 - - 71,750Sub-total non-executive directors 434,213 - - 98,113 - - 532,326

Executive directorsGregory J Bourke 479,633 - - 24,052 3,382 32,609 539,676Senior ExecutivesTim Peters 289,410 - - 24,240 1,539 21,509 336,698Michael Knaap 282,543 - - 16,470 1,771 21,509 322,293Grant Leyden 239,468 - 25,126 16,470 2,740 21,509 305,313Jeff Pentney 211,143 - - 23,886 2,342 10,754 248,125Mark Connolly(5) 209,414 - - 16,470 4,324 - 230,208Mark Kluver 175,131 - - 18,428 7,414 10,754 211,727Sub-total senior executives 1,886,742 - 25,126 140,016 23,512 118,644 2,194,040

Total key management personnelcompensation (Group) 2,320,955 - 25,126 238,129 23,512 118,644 2,726,366

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(continued)Remuneration report(continued)Remuneration tables

(1) Includes fringe benefits tax and other non-cash benefits (excluding superannuation).(2) Mr. Riordan resigned as a director and chairman on 22 April 2013.(3) Mr. Smith commenced as a director and chairman on 22 April 2013.(4) Mr. R Rijs received additional payment for manufacturing consulting services detailed under Related Party Transactions.(5) Mr. Connolly resigned effective from 28 June 2013.

Remuneration shown for the key management personnel is for the full financial year.

2012

Short-term employee benefits

Post-employmentbenefits

Long-term

benefits

Share-based

payments

Name

Cashsalary and

fees

Shortterm

incentive

Non-monetarybenefits

(1)Super-

annuation

Longserviceleave Options Total

$ $ $ $ $ $ $Non-executive directorsChris J Riordan - Chairman 154,500 - - - - - 154,500John P Schmoll 73,853 - - 6,647 - - 80,500Gregory J Dhnaram 53,517 - - 16,483 - - 70,000Richard C Rijs 18,073 - - 51,927 - - 70,000J Curt Leonard 34,102 - - 35,898 - - 70,000Henricus J Rijs(2) 65,003 - - 5,850 - - 70,853Sub-total non-executive directors 399,048 - - 116,805 - - 515,853

Executive directorsGregory J Bourke 438,663 27,690 - 48,837 2,603 (129,742) 388,051Senior ExecutivesTim Peters 259,200 - - 46,800 - (57,673) 248,327Michael Knaap 274,992 17,485 - 15,775 1,304 (77,900) 231,656Grant Leyden 233,105 13,485 32,821 15,775 2,935 (77,900) 220,221Jeff Pentney 222,846 14,860 - 21,476 - (38,950) 220,232Mark Connolly 201,260 13,868 - 15,775 4,624 (38,950) 196,577Mark Kluver 154,087 12,176 23,576 17,647 4,487 (6,130) 205,843Sub-total senior executives 1,784,153 99,564 56,397 182,085 15,953 (427,245) 1,710,907Total key management personnelcompensation (group) 2,183,201 99,564 56,397 298,890 15,953 (427,245) 2,226,760

(1) Includes fringe benefits tax, the value of shares purchased under the Employee share scheme and other non-cashbenefits (excluding superannuation).(2) H Rijs received $853 as salary and superannuation and an $11,910 termination payment being accrued annual leavewhen he ceased employment as a senior executive on 1 July 2011

Remuneration shown for the key management personnel is for the full financial year.

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(continued)Remuneration reportSTIP payments to key management personnel for FY2013Details of STIP payments to key management personnel for FY2013 are set out in the table below. Payments tosenior executives may vary based on individual performance and results achieved.

Name Maximum Potential STI Achieved FY2013 % of the Maximum Potential % forfeited

($) ($)G Bourke 126,536 - - 100%M Knaap 54,085 - - 100%G Leyden 46,294 - - 100%T Peters 56,732 - - 100%M Connolly 40,857 - - 100%J Pentney 42,512 - - 100%M Kluver 35,007 - - 100%

(1) As the threshold level of Group EBIT financial performance was not achieved for the full FY2013, no payments were madeto senior executives under the STIP for FY2013.

Managing director and senior executives' long-term incentivesThe following tables provide the details of options allocated to the key management personnel pursuant to theLTIP. The grant of options to the Managing Director was approved by shareholders at the Annual GeneralMeetings on 25 November 2010 and 22 November 2012 respectively, in accordance with Listing Rule 10.14.

Accounting value of all LTI equity instruments - FY2013

Name Date of GrantNo. of

options

No. ofPerformance

Rights

TotalAccounting

Value FY2013

Accounting valueas % of Total

Remuneration (1)

($) (%)

G Bourke25 Nov 2010 1,200,000 - - -22 Nov 2012 - 308,800 32,609 4.9

M Knaap3 Dec 2009 600,000 - - -3 Sept 2012 - 154,400 21,509 5.7

G Leyden3 Dec 2009 600,000 - - -3 Sept 2012 - 154,400 21,509 6.6

T Peters28 Jan 2010 600,000 - - -3 Sept 2012 - 154,400 21,509 5.5

M Connolly (2)3 Dec 2009 300,000 - - -3 Sept 2012 - 77,200 - -

J Pentney3 Dec 2009 300,000 - - -3 Sept 2012 - 77,200 10,754 3.7

M Kluver

1 Oct 2010 150,000 - - -3 Sept 2012 - 77,200 10,754 4.5

(1) The EPS hurdles for Tranches 1 and 2 of the 2010 LTIP were not achieved at the end of FY2012 and FY2013 andtherefore, these options have expired and an adjustment was made to the accounts in accordance with the AccountingStandards in FY2012.(2) M Connolly resigned effective from 28 June 2013, therefore, there is no accounting value for the performance rights he wasgranted as they were forfeited on cessation of employment.

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(continued)Remuneration report(continued)Managing director and senior executives' long-term incentives

Number of equity instruments granted and vested in FY 2013 - Options

Name Options OptionsGranted

OptionsVested

OptionsExpired/

forfeited (1)

Balance

1 July 2012 30 June 2013

G Bourke 600,000 - - 600,000 -

M Knaap 300,000 - - 300,000 -

G Leyden 300,000 - - 300,000 -

T Peters 300,000 - - 300,000 -

M Connolly (2) 150,000 - - 150,000 -

J Pentney 150,000 - - 150,000 -

M Kluver 150,000 - - 150,000 -

(1) The EPS hurdles for Tranche 2 were not achieved at the end of FY2013, and therefore, these options expired and anadjustment was made to the accounts to deregonised the expense previously accrued in accordance with the AccountingStandards in FY2012.(2) M Connolly resigned as General Manager Marketing on 28 June 2013.

Number of equity instruments granted and vested in FY 2013 - Performance Rights

Name Performance Rights PerformanceRights

Granted

PerformanceRightsVested

PerformanceRights

Expired/forfeited

Balance

1 July 2012 30 June 2013

G Bourke - 308,800 - - 308,800

M Knaap - 154,400 - - 154,400

G Leyden - 154,400 - - 154,400

T Peters - 154,400 - - 154,400

M Connolly (1) - 77,200 - 77,200 -

J Pentney - 77,200 - - 77,200

M Kluver - 77,200 - - 77,200

(1) M Connolly resigned as General Manager Marketing on 28 June 2013 and therefore all Performance Rights were forfeitedon cessation.

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Value of options granted, exercised and expired/forfeited in FY 2013

Name FinancialYear

Fair value atgrant dateper share -Tranche 1

Fair value atgrant dateper share -Tranche 2

Exercised AccountingValue Expired /

forfeited (1)

($) per share ($) per share ($) ($)

G Bourke 2013 TSR 0.89 0.70 - -

EPS 1.42 1.34 - -

2012 - - - -

2011 - - - -

2010 - - - -

M Knaap 2013 TSR 1.02 0.79 - -

EPS 1.43 1.36 - -

2012 - - - -

2011 - - - -

2010 - - - -

G Leyden 2013 TSR 1.02 0.79 - -

EPS 1.43 1.36 - -

2012 - - - -

2011 - - - -

2010 - - - -

T Peters 2013 TSR 1.02 0.79 - -

EPS 1.43 1.36 - -

2012 - - - -

2011 - - - -

2010 - - - -

MConnolly(2)

2013 TSR 1.02 0.79 - 10,754

EPS 1.43 1.36 - -

2012 - - - -

2011 - - - -

2010 - - - -

J Pentney 2013 TSR 1.02 0.79 - -

EPS 1.43 1.36 - -

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2012 - - - -

2011 - - - -

2010 - - - -

M Kluver 2013 TSR 1.02 0.79 - -

EPS 1.43 1.36 - -

2012 - - - -

2011 - 0.27 - -

2010 - - - -

(1) As Tranche 2 options granted in 2010 have expired and the accounting expense previously attributed to these options wasadjusted in FY2012 with the full fair value forfeited, and therefore there was no further value to be adjusted in FY2013.(2) M Connolly resigned as General Manager for Marketing on 28 June 2013 and therefore all Options and Performance Rightswere forfeited on cessation of employment.

Details of remuneration: Share-based compensation benefits(i) Options & Performance RightsThe options & performance rights vest after three years, provided the vesting conditions are met. No options orperformance rights will vest if the conditions are not satisfied. The maximum value of the options & performancerights yet to vest has been determined as the amount of the grant date fair value of the options & performancerights that are yet to be expensed.

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(continued)Remuneration report(continued)Details of remuneration: Share-based compensation benefits

(i) (continued)Options & Performance RightsShare-based compensation benefits (options & performance rights)

Name Year granted Type Vested Forfeited

Financialyears inwhich

options mayvest

Maximumtotal valueof grant yetto vest (7)

% % $

G Bourke 2013 (1) Perf Right - - 22/11/2014 43,8502013 (2) Perf Right - - 22/11/2014 27,4832013 (3) Perf Right - - 22/11/2015 165,5172013 (4) Perf Right - - 22/11/2015 86,4642010 (5) Options - 100 - -

M Knaap 2013 (1) Perf Right - - 03/9/2014 22,0792013 (2) Perf Right - - 03/9/2014 15,7492013 (3) Perf Right - - 03/9/2015 83,9942013 (4) Perf Right - - 03/9/2015 48,7902010 (5) Options - 100 - -

G Leyden 2013 (1) Perf Right - - 03/9/2014 22,0792013 (2) Perf Right - - 03/9/2014 15,7492013 (3) Perf Right - - 03/9/2015 83,9942013 (4) Perf Right - - 03/9/2015 48,7902010 (5) Options - 100 - -

J Pentney 2013 (1) Perf Right - - 03/9/2014 11,0402013 (2) Perf Right - - 03/9/2014 7,8742013 (3) Perf Right - - 03/9/2015 41,9972013 (4) Perf Right - - 03/9/2015 24,3952010 (5) Options - 100 - -

M Connolly (6) 2013 (1) Perf Right - 100 - -2013 (2) Perf Right - 100 - -2013 (3) Perf Right - 100 - -2013 (4) Perf Right - 100 - -2010 (5) Options - 100 - -

T Peters 2013 (1) Perf Right - - 3/09/2014 22,0792013 (2) Perf Right - - 3/09/2014 15,7492013 (3) Perf Right - - 3/09/2015 83,9942013 (4) Perf Right - - 3/09/2015 48,7902010 (5) Options - 100 - -

M Kluver 2013 (1) Perf Right - - 3/09/2014 11,0402013 (2) Perf Right - - 3/09/2014 7,8742013 (3) Perf Right - - 3/09/2015 41,9972013 (4) Perf Right - - 3/09/2015 24,3952010 (5) Options - 100 - -

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(continued)Remuneration report(continued)Details of remuneration: Share-based compensation benefits

(i) (continued)Options & Performance Rights

(1) 2013 LTIP Tranche 1 - EPS(2) 2013 LTIP Tranche 1 - TSR(3) 2013 LTIP Tranche 2 - EPS(4) 2013 LTIP Tranche 2 - TSR(5) Tranche 2 options under the 2010 LTIP did not achieve the performance hurdle by 30 June 2013 and these have nowexpired.(6) Mr. Connolly resigned as General Manager Marketing on 28 June 2013 and therefore all Performance Rights were forfeitedon cessation.(7)The Board has determined that the Tranche 1 EPS growth hurdle of the 2013 LTIP is unlikely to be achieved and anadjustment has been made to the accounts in accordance with the Accounting Standards.

Shares under performance rightsunder performance rights at the date of this report are asPatties Foods LimitedUnissued ordinary shares of

follows:

Date performance rights granted Expiry date

Number underperformance

rights

22 November 2012 30/9/2014 308,8003 September 2012 30/9/2015 617,600Total 926,400

Loans to directors and executivesThere are no loans to directors or executives at 30 June 2013 other than loans to executives of up to $1,000

27.under standard terms of the Group's exempt employee share plan, see note

Prohibition on hedging by key management personnelThe Group has adopted a policy which prohibits key management personnel and their closely related parties fromentering into an arrangement that has the effect of limiting the exposure of a member of the key managementpersonnel to risk relating to an element of that member's remuneration. The policy complies with therequirements of s.206J of the Corporations Act 2001.

Insurance of officersDuring the financial year, Patties Foods Limited paid a premium of $35,726 (2012: $31,003) to insure thedirectors and secretary of the Group and the executives of the Group.

The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings thatmay be brought against the officers in their capacity as officers of the Group, and any other payments arisingfrom liabilities incurred by the officers in connection with such proceedings, other than where such liabilities ariseout of conduct involving a willful breach of duty by the officers or the improper use by the officers of their positionor of information to gain advantage for themselves or someone else or to cause detriment to the Group. It is notpossible to apportion the premium between amounts relating to the insurance against legal costs and thoserelating to other liabilities.

Non-audit servicesThe Group may decide to employ the auditor on assignments additional to their statutory audit duties where theauditor's expertise and experience with the Group are important.

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PricewaterhouseCoopers, ABN 52 780 433 757Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Auditor’s Independence Declaration

As lead auditor for the auditthe best of my knowledge and belief, there have been:

a) no contraventions of the auditrelation to the audit;

b) no contraventions of any applicable code of professional conduct in relation to the

This declaration is in respect of

John O’DonoghuePartnerPricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001

T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au


Auditor’s Independence Declaration

audit of Patties Foods Limited for the year ended 30 June 2013the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act 2001; and

no contraventions of any applicable code of professional conduct in relation to the

This declaration is in respect of Patties Foods Limited and the entities it controlled

Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001

30 June 2013, I declare that to

Corporations Act 2001 in

no contraventions of any applicable code of professional conduct in relation to the audit.

it controlled during the period.

Melbourne19 August 2013

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Patties Foods LimitedCorporate governance statement

30 June 2013

Corporate governance statement

The Patties Foods Limited board of directors (Board) is committed to achieving best practice in the area ofcorporate governance and business conduct. This statement outlines the main corporate governance principlesand practices followed by Patties Foods Limited.

The Board2013.30 JuneThe Group's corporate governance practices were in place throughout the year endedis comfortable that the practices are appropriate for a company of Patties Foods' size. Below are the maincorporate governance practices in place (unless otherwise stated) throughout the reporting period in relation tothe corporate governance principles and recommendations published by the ASX Corporate GovernanceCouncil.

Principle 1- Lay solid foundations for management and oversight

The Group has adopted a Board Charter which is available on the Group's website.

The Board Charter divides functions and responsibilities between the Board and senior executives, including theManaging Director. While the Board is responsible for the overall direction of the Group, day-to-day managementand administration is delegated to the Managing Director and the senior executive team. The Board will regularlyreview the allocation of particular functions to ensure that it remains appropriate for the needs of the Group.

The Board is responsible for monitoring the performance of the Managing Director and other senior management.In addition, the Group has put processes in place for reviewing the performance of senior management againstthe Group's performance objectives and business plans.

Performance evaluation of senior executives takes place regularly and is in accordance with the processesreferred to above.

In relation to newly appointed executives, an induction program is made available by the Group to enable them togain an understanding of:

• the Group's financial position, strategies, operations and risk management policies; and;

• the respective rights, duties and responsibilities of the Board and senior executives.

Principle 2- Structure the board to add value

The structure of the board of directorsThe constitution and the Board charter govern the Board's composition. The Board Charter details the functionsand responsibilities of the Board.

Board compositionThe Board Charter states that the Board should comprise a majority of independent directors.

The Board seeks to ensure that the composition of the Board reflects the appropriate range of independence,skills, experience, expertise and diversity for the Group. The Remuneration and Nomination Committee isresponsible for recommending candidates for appointment to the Board and the re-appointment of existingdirectors after reviewing the relevant person's skills, experience, expertise and background within the context ofan appropriate matrix.

The minimum number of directors is three and the maximum number is ten. Directors will be elected at annualgeneral meetings of the Group.

The Managing Director will not retire by rotation. Provided that the Group has three or more directors, one third ofthe directors (rounded down to the nearest whole number) will retire at each annual general meeting. In anycase, no director may retain office for more than three years or beyond the third annual general meeting,following the director's last election or appointment, whichever is the longer period. In each case, if the retiringdirector is eligible, they may then seek re-election.

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(continued)Principle 2- Structure the board to add value(continued)Board composition

The Directors' Report, on pages 7 to 10, outlines the period of office, relevant skills, experience, expertise andbackground of each director in office at the date of this report.

Directors' independenceEvery member of the Board is required to apply independent judgment to decision making in their capacity as adirector.

An independent non executive director is one who:• is independent of management;

• is free of any business or other relationship that could materially interfere with, or could reasonably be perceivedto materially interfere with, the exercise of their unfettered and independent judgment;

• meets the criteria for independence set out in Box 2.1 of the Principles of Good Corporate Governance andBest Practice Recommendations published by the ASX Corporate Governance Council (Best PracticeRecommendations);

• has not served on the Board for a period which could materially interfere with the director’s ability to act in thebest interests of the Group; and

• does not have any interest or business relationship which could, or could reasonably be perceived to, materiallyinterfere with the directors' ability to act in the best interests of the Group.

'Materiality' for these purposes is assessed on a case by case basis having regard to the Group's and therelevant director's circumstances, including the significance of the relationship to the director in the context of thedirector’s activities as a whole.

Mr. G.J. Bourke, Mr. R.C. Rijs and Mr. H.J. Rijs are not considered to be independent directors due to theircurrent or former executive roles or significant shareholdings or association with significant shareholdings.

The other directors, namely Mr. M.Smith, Mr. J.C. Leonard, Mr. G. Dhnaram and Mr. J.P.Schmoll are consideredby the Board to be independent directors.

Independent professional adviceThe Board and Board committees have the right, in connection with their duties and responsibilities, to seekindependent professional advice, at the Group's expense if the Chairman agrees.

Chairman and Managing Director (MD)The Chairman is responsible for leading the Board, ensuring directors are properly briefed in all matters relevantto their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with theGroup’s senior executives. The Chairman is an independent director.

The Managing Director is responsible for implementing Group strategies and policies.

The Board Charter specifies that these are separate roles to be undertaken by separate people.

It is the practice of the Board that, prior to commencement of each Board meeting, non-executive Boardmembers meet without management being present.

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(continued)Principle 2- Structure the board to add valueCommitmentThe Board held fifteen meetings and an additional strategic planning session during the year.

The number of meetings of the Group’s Board of Directors and of each Board committee held during the yearand the number of meetings attended by each director is disclosed on page 10.2013,30 Juneended

The commitments of non executive directors are considered prior to the director's appointment to the Board andare reviewed regularly as part of performance assessments.

Performance evaluationThe Board undertakes regular assessments of its collective performance as well as, the performance of its Chairand each director and of its committees.

The Chairman undertakes an annual assessment of the performance of individual directors and meets privatelywith each director to discuss their assessment.

Board committeesThe Board has established a number of committees to assist in the execution of its duties and to allow detailedconsideration of complex issues. Current committees of the Board are the Remuneration and NominationCommittee and the Audit and Risk Committee. Each consists entirely of non-executive directors. Committeemembers are appointed for a one year term of office, after which their appointment may be subject to annualrotation at the discretion of the Board.

Each committee has its own written charter setting out its role and responsibilities, composition, structure,membership requirements and the manner in which the committee is to operate. All of these charters arereviewed on an annual basis. All matters determined by committees are submitted to the full Board asrecommendations for Board decisions. Minutes are tabled at a subsequent Board meeting.

Other committees may be established by the Board as and when required. Membership of the Board committeeswill be based on the needs of the Group, relevant legislative and other requirements and the skills andexperience of individual directors.

Remuneration and Nomination committeeThe Remuneration and Nomination Committee consists of the following non-executive directors with the majoritybeing independent:Mark G Smith (Chairman);J Curt Leonard; andRichard C Rijs

Details of these directors’ attendance at Remuneration and Nomination Committee meetings are set out in theDirectors’ Report on page 10.

The Remuneration and Nomination Committee operates in accordance with a charter. The main responsibilitiesof the Committee in relation to nomination issues are to:

• Review the process for the nomination and selection of non-executive directors to the Board;

• Review succession plans and induction programs for the Group's non-executive directors and seniormanagement;

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(continued)Principle 2- Structure the board to add value(continued)Remuneration and Nomination committee

• Review the induction programs for the Group's non-executive directors.

The Committee adopts the following process for the nomination and selection of non-executive directors to thePFL Board:

• ensuring regular review of the performance and effectiveness of the Board and considering any gaps in theskills, experience and diversity on the Board;

• before recommending the re appointment of an existing director or the appointment of a new director, reviewingthat director's skill, experience and background within the context of the matrix of desired skills, experience anddiversity;

• assisting in identifying, interviewing and recruiting candidates for the Board and utilising professional assistancewhere required.

The full Board then appoints the most suitable candidate who must stand for election at the next annual generalmeeting of the Group. The Committee’s nomination of existing directors for reappointment is not automatic and iscontingent on their past performance, contribution to the Group and the current and future needs of the Boardand Group.

All new directors participate in a comprehensive induction program which covers the operation of the Board andits committees and financial, strategic, operations and risk management issues.

Audit and Risk CommitteeThe Audit and Risk Committee consists of the following non-executive directors with the majority beingindependent:

John P Schmoll (Chairman);Henricus J Rijs; andGregory J Dhnaram

Details of these directors’ attendance at Audit and Risk Committee meetings are set out in the Directors’ Reporton page 6.

All directors are invited to attend the Audit and Risk Committee meetings as guests. The Managing Director andChief Financial Officer are permanent invitees to the meetings at the discretion of the committee.

The main responsibilities of the Committee are outlined in Principle 4 - Safeguard integrity in financial reporting.

Principle 3- Promote ethical and responsible decision making

Code of conductThe Group has a Code of Conduct and Ethics policy (Code) which has been fully endorsed by the Board andapplies to all directors and employees. The Code is regularly reviewed and updated as necessary to ensure itreflects the highest standards of behaviour and professionalism and the practices necessary to maintainconfidence in the Group’s integrity.

In summary, the Code requires that each director, manager and employee of the Group, at all times, act with theutmost honesty, integrity and responsibility in their dealings with customers, suppliers and competitors and otheremployees.

The Group has a strict approach to business courtesies and does not support facilitation payments andcommissions. Bribes are absolutely prohibited.

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(continued)Principle 3- Promote ethical and responsible decision making(continued)Code of conduct

The Board, management and all employees of the Group are committed to complying with the Code. It is theresponsibility of each individual to comply with the Code and each person will be accountable for suchcompliance. Where an employee is concerned that there has been a violation of the Code, it can be reported ingood faith to management. A record of such reports will be kept by the Group.

The Group has a securities trading policy which outlines the restrictions, closed periods and processes requiredwhen directors, CEO and key management personnel trade PFL securities. Broadly, it states that the purchaseand sale of Group securities by directors and employees is only permitted during the thirty day period following:

• the release of the half-yearly results to the market;

• the release of the full year results to the market; and

• the release of the Chairman’s address for the Group’s AGM.

Any trading undertaken by directors must be notified to the company secretary and Chairman.

The Code and the Group’s securities trading policy are provided to each new employee as part of their inductiontraining.

A copy of the Code and the securities trading policy are available on the Group’s website.

DiversityThe Group is an equal opportunity employer and welcomes people from a diverse range of backgrounds.Workplace diversity refers to the variety of differences between people in an organisation. It recognises thatdiversity encompasses gender, race, ethnicity, age, disability and cultural background among other matters.

Patties Foods believes that embracing diversity in its workforce contributes to the achievement of its corporateobjectives and enhances its reputation.

The Group is committed to achieving the goals of providing access to equal opportunities at work based on meritand fostering a corporate culture that embraces and values diversity.

The Group adopted a Group Diversity Policy in 2011 that sets out the diversity initiatives for Patties Foods Ltd.The objectives of the policy are to ensure that Patties Foods;

• provides access to equal opportunities at work based on merit,

• fosters a corporate culture that embraces and values diversity,

• establishes measurable objectives for achieving gender diversity, and

• reviews and assesses, at least annually, both the measurable objectives and Patties Foods’ progress inachieving them.

include;30 June 2013The measurable objectives established by the Board in 2011 and the status as at

• increasing the representation of women on the Board as vacancies and circumstances allow from 0% inthere has been no change from 2012.30 June 20132012 to 14% by June 2015. As of

• increasing the representation of women on the senior executive team as vacancies and circumstancesthere has been no change from 2012.30 June 2013allow from 0% in 2012 to 14% by June 2015. As of

• increasing the representation of women on the senior leaders group from 26% in 2012 to 37% by Junethe representation of women on the senior leaders group is 25%.30 June 20132015. As of the

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(continued)Principle 3- Promote ethical and responsible decision making(continued)Diversity

• strengthen the talent pipeline to ensure the representation of women in the high potential talent matrixthe representation of women in the30 June 2013increases from 18% to 30% by December 2015. As of

high potential talent matrix is 25%.

was 49%.30 June 2013The proportion of women employed by the Group as at

A number of initiatives have been introduced to assist achieve the measurable objectives including;

• Implementing a talent review process with a particular focus on the development programs required toincrease the representation on women considered as high potential under the Patties Foods TalentManagement System;

• Ensuring that all applicants for positions which are internally and externally advertised are interviewed bya selection panel which includes at least one female interviewer;

• Assessing gender pay equity on an annual basis;

• Implementing flexible work arrangements to achieve successful maternity leave return to work outcomesand to support employees with family responsibilities; and

• Implementing a program to support employees in sourcing home help, such as child carers, cleanersand gardeners, providing them with greater flexibility over the non-work aspects of their lives.

To assist the Board in fulfilling its responsibilities in relation to Diversity the implementation of these objectives isoverseen by the Remuneration and Nomination Committee chaired by the Chairman of the Board.

The policy is subject to periodic review by, and may be changed by resolution of, the Board. The policy has nocontractual effect.

The Remuneration and Nomination Committee is responsible for assisting the Board to effectively implement itsDiversity Policy.

To assist the Board to fulfill its responsibilities, the Remuneration & Nomination Committee shall:

• regularly oversee a review of the relative proportion of men and women across the whole of PattiesFoods’ organisation, in senior management positions and the Board, respectively;

• report to the Board on the findings of such reviews and its recommendations for the objectives to be setby the Board for achieving gender diversity, having regard to any gaps identified by such reviews; and

• report to the Board, at least annually, on Patties Foods’ progress in achieving the objectives set by theBoard for achieving gender diversity;

• consider other initiatives to promote diversity in the workplace.

In accordance with the Workplace Gender Equality Act 2012 (Cth), the Group submitted its first WorkplaceGender Equity Report to the Workplace Gender Equality Agency prior to 31st May 2013. A copy of the Reportcan be viewed and downloaded from the Group’s website.

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Principle 4- Safeguard integrity in financial reporting

It is the Board's responsibility to ensure that an effective internal control framework exists within the Group. Thisincludes internal controls to deal with both the effectiveness and efficacy of significant business processes, thesafeguarding of assets, the maintenance of proper accounting records and reliability of financial information. TheBoard has delegated the responsibility for the establishment and maintenance of a framework of internal controland ethical standards for the management of the Group to the Audit and Risk Committee.

The Audit and Risk Committee has a formal charter approved by the Board. It consists of 3 non-executivedirectors with the most applicable expertise and skills for this Committee and shall comprise a majority ofindependent directors. The chairman of the Committee is not the chairman of the Board. The Managing Directorand the Chief Financial Officer are invited to meetings of the Committee at the discretion of the Committee.

The main responsibilities of the Committee are to:

• review and report to the Board on the annual report, the annual and half year financial reports and all otherfinancial information published by the Group or released to ASX;

• assist the Board in reviewing the effectiveness of the Group's internal control environment coveringeffectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable lawsand regulations;

• oversee the effective operation of the risk management framework - see Principle 7 below;

• recommend to the Board the appointment, removal and remuneration of the external auditors and review theterms of their engagement, and the scope and quality of the audit; and

• review and assess the key operational and financial risks that can impact on the Group's business - seePrinciple 7 below.

The Managing Director and the Chief Financial Officer have declared in writing to the Board that the financialrecords, risk management systems and internal compliance and controls of the Group have been properly

comply with the accounting30 June 2013maintained, the Group's financial reports for the financial period endedstandards and present a true and fair view of the Group's financial position and performance. This statement isrequired twice a year in respect of each reporting period.

The external auditor is invited to meetings of the Committee at the discretion of the Committee. The externalauditor met with the Committee 4 times during the period.

The Committee's charter may be found on the Group's website.

Principles 5 - Make timely and balanced disclosures

The Group, its directors and staff are very much aware of continuous disclosure requirements and operate in anenvironment where strong emphasis is placed on full and appropriate disclosure.

Principles 6 - Respect the rights of shareholders

The Group provides shareholders with information using a Continuous Disclosure Policy which includesidentifying matters that may have a material effect on the price or value of the Group's securities, notifying themto ASX, posting them on the Group's website and issuing media releases.

The Group has a communications strategy to promote effective communication with shareholders. Subject to theASX listing rules on disclosure, the Group communicates regularly with shareholders, brokers and analysts andmaintains a review of information provided on its website.

Shareholders are encouraged to attend the Group's AGM and use this opportunity to ask questions. The externalauditor attends the AGM and is available to answer questions from shareholders about the conduct of the auditand the preparation and content of the auditor's report.

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Principle 7- Recognise and manage risk

The Group believes that there is a need for formal policies on risk oversight and management and accordinglyrisk matters are regularly addressed at Board meetings.

The risk management framework, assessments thereof and responses thereto are reviewed both individually andcollectively by the Board and senior management with periodic review by the Audit and Risk Committee.

The Board has required senior management to design and implement a risk management and internal controlsystem to manage the Group's material business and financial risks.

The Board has required management to report to it on the manner in which those risks are being managedeffectively. Management has provided its report on the manner in which those risks are being managedeffectively to the Board.

Senior management reported to the Audit and Risk Committee as to the effectiveness of the Group'smanagement of material business and financial risks.

The Managing Director and the Chief Financial Officer have declared in writing to the Board that the section 295Adeclaration is founded on a sound system of risk management and internal control, and that the system isoperating effectively in all material respects in relation to financial risks and policies adopted by the Board ofDirectors.

The Group's policies on risk oversight and management of material business risks may be found in the Audit andRisk Committee Charter. This document may be found on the Group's website.

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Principle 8- Remunerate fairly and responsibly

Remuneration and Nomination CommitteeThe Group has a Remuneration and Nomination Committee.

The Remuneration and Nomination Committee consists of the following directors with the majority beingindependent:

Mark G Smith (Chairman);J Curt Leonard; andRichard C Rijs

Details of these directors’ attendance at Remuneration and Nomination Committee meetings are set out in theDirectors’ Report on page 10.

The Remuneration and Nomination Committee operates in accordance with a charter. This document may befound on the Group’s website. The main responsibilities of the Committee in relation to remuneration issues areto:

• Provide advice in relation to remuneration packages of key management, non-executive directors and executivedirectors, equity-based incentive plans and other employee benefit programs;

• Review the Group's recruitment, retention and termination policies as well as succession plans of keymanagement and executives;

• Review remuneration by gender at all levels of the Group;

• Review the Group's superannuation arrangements;

• Consider those aspects of the Group remuneration policies and packages, including equity-based incentives,which should be subject to shareholder approval;

• Review staff resourcing trends and metrics; and

• Review other relevant matters identified from time to time, or requested by the Board.

The Committee has a minimum of three directors, all of whom are non-executive directors, and is chaired by anindependent chair.

At the discretion of the Committee, internal specialists or external advisors may be invited to Remuneration andNomination Committee meetings, subject to the requirements of s206K, 206L and 206M in relation to theengagement of a remuneration consultant. The Committee meets at least two times a year, and additionally asrequired for it to undertake its role effectively.

Further information on directors’ and executives’ remuneration, including principles used to determineremuneration, is set out in the directors’ report under the heading ‘Remuneration Report’.

Retirement allowances for directorsAs detailed in the Remuneration Report, there are no retirement benefit schemes in place for directors other thanstatutory superannuation contributions.

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62 007 157 182ABNPatties Foods Limited30 June 2013-Annual report

Contents PageFinancial statements

Consolidated statement of comprehensive income 41Consolidated balance sheet 42Consolidated statement of changes in equity 43Consolidated statement of cash flows 44Notes to the consolidated financial statements 45

Directors' declaration 90Independent auditor's report to the members 91

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Patties Foods LimitedConsolidated statement of comprehensive income

For the year ended 30 June 2013

Consolidated

Notes2013$'000

2012$'000

Revenue from continuing operationsSale of goods 5 244,141 235,040Other revenue from ordinary activities 5 667 803

244,808 235,843

Other income 6 15 48

Cost of sales of goods (158,243) (146,100)Distribution (27,806) (26,852)Sales and marketing (21,923) (21,255)Administration (12,204) (11,128)Impairment loss 7 (11,817) -Finance costs 7 (4,016) (4,889)Share of net profit of associates accounted for using the equity method 1,716 1,128Profit before income tax 10,530 26,795

Income tax expense 8 (5,741) (7,313)Profit from continuing operations 4,789 19,482

Other comprehensive incomeItems that may be reclassified to profit or lossCash flow hedges 25(a) 858 (560)Income tax relating to components of other comprehensive income (257) 169

net of taxyear,Other comprehensive income for the 601 (391)

yearTotal comprehensive income for the 5,390 19,091

Profit is attributable to:Patties Foods LimitedOwners of 4,789 19,482

4,789 19,482

is attributable to:yearTotal comprehensive income for theOwners of Patties Foods Limited 5,390 19,091

5,390 19,091

Cents Cents

Earnings per share for profit attributable to the ordinary equityholders of the parent entity :Basic earnings per share 34 3.4 14.0Diluted earnings per share 34 3.4 13.8

should be read in conjunction with theconsolidated statement of comprehensive incomeThe aboveaccompanying notes.

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Patties Foods LimitedConsolidated balance sheet

As at 30 June 2013

Consolidated

Notes2013$'000

2012$'000

ASSETSCurrent assetsCash and cash equivalents 10 68 151Receivables 11 53,961 51,410Inventories 12 40,925 37,980Derivative financial instruments 19 557 -Assets classified as held for sale 9 - 1,650Total current assets 95,511 91,191

Non-current assetsInvestments accounted for using the equity method 13 9,888 9,072Property, plant and equipment 14 72,665 69,329Intangible assets 16 66,493 78,723Total non-current assets 149,046 157,124

Total assets 244,557 248,315

LIABILITIESCurrent liabilitiesPayables 17 32,405 26,899Borrowings 18 4,330 2,124Derivative financial instruments 19 2 105Current tax liabilities 1,317 3,193Provisions 20 3,508 3,400Total current liabilities 41,562 35,721

Non-current liabilitiesBorrowings 21 63,750 68,542Deferred tax liabilities 22 6,031 5,995Provisions 23 1,370 1,083Derivative financial instruments 19 717 917Total non-current liabilities 71,868 76,537

Total liabilities 113,430 112,258

Net assets 131,127 136,057

EQUITYContributed equity 24 68,571 68,443Reserves 25(a) 6 (714)Retained earnings 25(b) 62,550 68,328Total equity 131,127 136,057

should be read in conjunction with the accompanying notes.consolidated balance sheetThe above

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Patties Foods LimitedConsolidated statement of changes in equity


Notes

Contributedequity$'000

Reserves$'000

Retainedearnings

$'000

Totalequity$'000

Balance at 1 July 2011 68,443 104 59,965 128,512

Profit for the year - - 19,482 19,482Changes in the fair value of cash flow hedges, net of tax - (391) - (391)Total comprehensive income for the year - (391) 19,482 19,091

Transactions with owners in their capacity as owners:Dividends provided for or paid 26 - - (11,119) (11,119)Employee Share Options 25 - (427) - (427)

- (427) (11,119) (11,546)

Balance at 30 June 2012 68,443 (714) 68,328 136,057

Balance at 1 July 2012 68,443 (714) 68,328 136,057

Profit for the year - - 4,789 4,789Changes in the fair value of cash flow hedges, net of tax - 601 - 601Total comprehensive income for the year - 601 4,789 5,390

Transactions with owners in their capacity as owners:Dividends provided for or paid 26 - - (10,567) (10,567)Employee Share Options 25 - 119 - 119Employee share scheme issue 24 128 - - 128

128 119 (10,567) (10,320)

Balance at 30 June 2013 68,571 6 62,550 131,127

should be read in conjunction with the accompanyingconsolidated statement of changes in equityThe abovenotes.

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Patties Foods LimitedConsolidated statement of cash flows


ConsolidatedNotes 2013

$'0002012$'000

Cash flows from operating activitiesReceipts from customers (inclusive of goods and services tax) 270,602 252,515Payments to suppliers and employees (inclusive of goods and servicestax) (237,874) (231,057)

32,728 21,458

Income taxes paid (7,828) (7,086)Borrowing costs paid (4,056) (4,966)Net cash inflow from operating activities 33 20,844 9,406

Cash flows from investing activitiesPayments for property, plant and equipment 14 (9,752) (9,728)Payments for intangibles - (350)Proceeds from sale of assets 908 -Dividends received 32(a) 900 900Interest received 41 44Net cash (outflow) from investing activities (7,903) (9,134)

Cash flows from financing activitiesProceeds from issues of shares and other equity securities 128 -Proceeds from borrowings 21 70,650 44,200Repayment of borrowings (75,065) (34,453)Dividends paid to group's shareholders 26 (10,567) (11,119)Net cash (outflow) from financing activities (14,854) (1,372)

Net (decrease)/ in cash and cash equivalents (1,913) (1,100)Cash and cash equivalents at the beginning of the financial year 151 1,251Cash and cash equivalents at end of year 10, 18 (1,762) 151

should be read in conjunction with the accompanying notes.consolidated statement of cash flowsThe above

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Patties Foods LimitedNotes to the consolidated financial statements

30 June 2013

Contents of the notes to the consolidated financial statements

Page

1 Summary of significant accounting policies 462 Financial risk management 563 Critical accounting estimates and judgements 594 Segment information 605 Revenue 616 Other income 617 Expenses 618 Income tax expense 629 Assets held for sale 6310 Current assets - Cash and cash equivalents 6311 Current assets - Receivables 6412 Current assets - Inventories 6513 Non-current assets - Investments accounted for using the equity method 6514 Non-current assets - Property, plant and equipment 6615 Non-current assets - Deferred tax assets 6716 Non-current assets - Intangible assets 6817 Current liabilities - Payables 7018 Current liabilities - Borrowings 7019 Derivative financial instruments 7120 Current liabilities - Provisions 7221 Non-current liabilities - Borrowings 7322 Non-current liabilities - Deferred tax liabilities 7423 Non-current liabilities - Provisions 7424 Contributed equity 7525 Reserves and retained earnings 7626 Dividends 7727 Key management personnel disclosures 7828 Remuneration of auditor 8129 Commitments 8130 Related party transactions 8231 Subsidiaries 8332 Investments in associates 8333 Reconciliation of profit after income tax to net cash inflow from operating activities 8434 Earnings per share 8435 Share-based payments 8536 Parent entity financial information 89

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1 Summary of significant accounting policies

are setfinancial statementsconsolidatedtheseThe principal accounting policies adopted in the preparation ofpresented, unless otherwise stated. Theyearsout below. These policies have been consistently applied to all the

subsidiaries.and itsPatties Foods Limitedconsisting ofentityconsolidatedare for thefinancial statements

(a) Basis of preparation

been prepared in accordance with Australian Accountinghavefinancial statementsgeneral purposeTheseStandards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues

2001.Corporations ActGroup Interpretations and the

(i) Compliance with IFRSThe financial report of Patties Foods Limited also complies with International Financial Reporting Standards(IFRS) as issued by the International Accounting Standards Board (IASB).

(ii) Historical cost conventionbeen prepared under the historical cost convention, as modified by thehavefinancial statementsThese

revaluation of financial assets and liabilities (including derivative instruments) at fair value through profit or loss.

(iii) Critical accounting estimatesrequires the use of certain critical accounting estimates. It also requiresfinancial statementsThe preparation of

The areasaccounting policies.Group'smanagement to exercise its judgement in the process of applying theinvolving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant

3.are disclosed in notestatements,financialto the

(b) Principles of consolidation

(i) Subsidiariesthe assets and liabilities of all subsidiaries of the Company asincorporatefinancial statementsconsolidatedThe

then ended. The Company and its subsidiariesyearand the results of all subsidiaries for the30 June 2013ator the consolidated entity.Grouptogether are referred to in this financial report as the

has the power toGroupSubsidiaries are all those entities (including special purpose entities) over which thegovern the financial and operating policies, generally accompanying a shareholding of more than one-half of thevoting rights.

Group.Subsidiaries are fully consolidated from the date on which control is transferred to the

Group.The acquisition method of accounting is used to account for business combinations by the

companies areGroupIntercompany transactions, balances and unrealised gains on transactions betweeneliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment ofthe asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure

Group.consistency with the policies adopted by the

(ii) Associateshas significant influence but not control, generally accompanyingGroupAssociates are all entities over which the

a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for usinginvestment in associatesGroup'sthe equity method of accounting, after initially being recognised at cost. The

32).(refer to noteincludes goodwill (net of any accumulated impairment loss) identified on acquisition

share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its shareGroup'sTheof post-acquisition movements in reserves is recognised in other comprehensive income. The cumulativepost-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivablefrom associates are recognised as reduction in the carrying amount of the investment.

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1 (continued)Summary of significant accounting policies

(b) (continued)Principles of consolidation(ii) (continued)Associates

share of losses in an associate equals or exceeds its interest in the associate, including anyGroup'sWhen thedoes not recognise further losses, unless it has incurredGroupother unsecured long-term receivables, the

obligations or made payments on behalf of the associate.

and its associates are eliminated to the extent of theGroupUnrealised gains on transactions between theinterest in the associates. Unrealised losses are also eliminated unless the transaction providesGroup's

evidence of an impairment of the asset transferred. Accounting policies of associates have been changed whereGroup.necessary to ensure consistency with the policies adopted by the

(c) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chiefoperating decision maker. The chief operating decision maker, who is responsible for allocating resources andassessing performance of the operating segments, has been identified as the Patties Leadership Team.

(d) Foreign currency translation

(i) Functional and presentation currencyoperations are measured using the currency ofGroup'sof each of thefinancial statementsItems included in the

financialconsolidatedthe primary economic environment in which it operates ('the functional currency'). Thefunctional and presentationLimited'sPatties Foodspresented in Australian dollars, which isarestatements

currency.

(ii) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing atthe dates of the transactions. Foreign exchange gains and losses resulting from the settlement of suchtransactions and from the translation at year end exchange rates of monetary assets and liabilities denominatedin foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cashflow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreignoperation.

(e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenueare net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

(i) Sale of goodsRevenue from the sale of goods is recognised when goods have been delivered to the customer, the customerhas accepted the goods and collectability of the related receivables is probable.

(ii) Interest incomeGroupInterest income is recognised using the effective interest method. When a receivable is impaired, the

reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at theoriginal effective interest rate of the instrument, and continues unwinding the discount as interest income. Interestincome on impaired loans is recognised using the original effective interest rate.

(iii) DividendsDividends are recognised as revenue when the right to receive payment is established.

(iv) Caravan park incomeThe Group obtains income from the operation of a caravan park business. Revenue from the caravan park isrecognised upon the delivery of the rental service to the customer.

(f) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that thegrant will be received and the Group will comply with all conditions or other contingencies attached to the grant.

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(g) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable incomebased on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable totemporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between theHowever,statements.financialconsolidatedtax bases of assets and liabilities and their carrying amounts in the

the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in atransaction other than a business combination that at the time of the transaction affects neither accounting nortaxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted orsubstantially enacted by the balance sheet date and are expected to apply when the related deferred income taxasset is realised or the deferred income tax liability is settled.

Management have determined that deferred tax assets and deferred tax liabilities associated with indefinite livedintangibles (note 1(p)) should be measured using the tax consequences that would follow from the sales of theseassets. This is on the basis that the assets have an indefinite life and are likely to be recovered through salerather than use.

Deferred tax assets are recognised for temporary deductible differences and unused tax losses only if it isprobable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assetsand liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets andtax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on anet basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised inother comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensiveincome or directly in equity, respectively.

(i) Tax consolidation legislationThe Company and its wholly owned Australian controlled entities are part of a tax consolidated group underAustralian tax law. Patties Foods Limited is the head entity in the tax consolidated group. Tax expense/income,deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the taxconsolidated group are recognised in the separate financial statements of the members of the tax consolidatedgroup using the 'stand alone taxpayer' approach by reference to the carrying amounts in the separate financialstatements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assetsand deferred tax assets arising from unused tax losses and tax credits of the members of the tax consolidatedgroup are recognised by the Company (as head entity in the tax consolidated group).

(h) Leases

as lessee, has substantially all the risks and rewardsGroup,Leases of property, plant and equipment where theFinance leases are capitalised at the lease’s inception at the fairleases.of ownership are classified as finance

value of the leased property or, if lower, the present value of the minimum lease payments. The correspondingrental obligations, net of finance charges, are included in short term and long term borrowings. Each leasepayment is allocated between the liability and finance cost. The finance cost is charged to the income statementover the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liabilityfor each period. The property, plant and equipment acquired under finance leases are depreciated over theasset’s useful life.

asGroupLeases in which a significant portion of the risks and rewards of ownership are not transferred to thePayments made under operating leases (net of any29).(notelessee are classified as operating leases

incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of thelease.

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(i) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are testedannually for impairment, or more frequently if events or changes in circumstances indicate that they might beimpaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’scarrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair valueless costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generating units). Non financial assets otherthan goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reportingdate.

(j) Cash and cash equivalents

statement of cash flows, cash and cash equivalents includesconsolidatedFor the purpose of presentation in thecash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments withoriginal maturities of three months or less that are readily convertible to known amounts of cash and which aresubject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within

balance sheet.consolidatedborrowings in current liabilities in the

(k) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost,less provision for impaired receivables. Trade and other receivables are generally due for settlement no morethan 60 days from the date of recognition.

Collectability of trade and other receivables are reviewed on an ongoing basis. Debts which are known to beuncollectible are written off. A provision for impairment of trade and other receivables is established when there isobjective evidence that the Group will not be able to collect all amounts due according to the original terms of thereceivables. The amount of the provision is the difference between the asset’s carrying amount and the presentvalue of estimated future cash flows, discounted at the original effective interest rate. The amount of the provisionis recognised in the income statement in other expenses.

(l) Inventories

(i) Raw materials and stores, work in progress and finished goodsRaw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisablevalue. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overheadexpenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individualitems of inventory on the basis of first-in first-out. Net realisable value is the estimated selling price in the ordinarycourse of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(m) Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through asale transaction rather than through continuing use and a sale is considered highly probable. They are measuredat the lower of their carrying amount and fair value less costs to sell.

Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and otherclassified as held for sale continue to be recognised.Groupexpenses attributable to the liabilities of a disposal

Non-current assets classified as held for sale are presented separately from the other assets in the balancesheet.

(n) Investments and other financial assets

ClassificationManagement determines the classification of its investments at initial recognition depending upon the purpose forwhich the investments were acquired. The following classifications are used:

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(n) (continued)Investments and other financial assets(i) Loans and receivablesLoans and receivables are non derivative financial assets with fixed or determinable payments that are notquoted in an active market. They arise when the Group provides money, goods or services directly to a debtor orother party with no intention of selling the receivable. They are included in current assets, except for those withmaturities greater than 12 months after the balance sheet date which are classified as non current assets. Loans

11).(noteand receivables are included in receivables in the balance sheet

Subsequent measurementLoans and receivables and held-to-maturity investments are carried at amortised cost using the effective interestmethod.

2.Details on how the fair value of financial instruments is determined are disclosed in note

Impairmentassesses at the end of each reporting period whether there is objective evidence that a financial assetGroupThe

or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, asignificant or prolonged decline in the fair value of a security below its cost is considered as an indicator that thesecurities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss-measured as the difference between the acquisition cost and the current fair value, less any impairment loss onthat financial asset previously recognised in profit or loss - is reclassified from equity and recognised in the profitor loss as a reclassification adjustment. Impairment losses recognised in profit or loss on equity instrumentsclassified as available-for-sale are not reversed through profit or loss.If there is evidence of impairment for any of the Group's financial assets carried at amortised cost, the loss ismeasured as the difference between the asset's carrying amount and the present value of estimated future cashflows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financialasset's original effective interest rate. The loss is recognised in profit or loss.

(o) Derivatives and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and aresubsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes infair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of theitem being hedged. Currently the Group only has derivatives designated as cash flow hedges which are hedgesof the cash flows of recognised assets and liabilities and highly probable forecast transactions.

documents at the inception of the hedging transaction the relationship between hedging instrumentsGroupTheand hedged items, as well as its risk management objective and strategy for undertaking various hedge

also documents its assessment, both at hedge inception and on an ongoing basis, ofGrouptransactions. Thewhether the derivatives that are used in hedging transactions have been and will continue to be highly effective inoffsetting changes in fair values or cash flows of hedged items.

19.The fair values of various derivative financial instruments used for hedging purposes are disclosed in noteThe full fair value of a hedging25.Movements in the hedging reserve in shareholder's equity are shown in note

derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is morethan 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item isless than 12 months.

(i) Cash flow hedgeThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flowhedges is recognised in other comprehensive income and accumulated in reserves in equity. The gain or lossrelating to the ineffective portion is recognised immediately in profit or loss within other income or otherexpenses.

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(o) (continued)Derivatives and hedging activities(i) (continued)Cash flow hedgeAmounts accumulated in equity are recycled in the income statement in the periods when the hedged item affectsprofit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecasttransaction that is hedged results in the recognition of a non financial asset (for example, inventory or fixedassets) the gains and losses previously deferred in equity are transferred from equity and included in the initialmeasurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss as cost ofgoods sold in the case of inventory, or as depreciation in the case of fixed assets.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria forhedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognisedwhen the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longerexpected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit orloss.

(ii) Derivatives that do not qualify for hedge accountingCertain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivativeinstrument that does not qualify for hedge accounting are recognised immediately in profit or loss and areincluded in other income or other expenses.

(p) Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditurethat is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,and the costGrouponly when it is probable that future economic benefits associated with the item will flow to the

of the item can be measured reliably. The carrying amount of any component accounted for as a separate assetis derecognised when replaced. All other repairs and maintenance are charged to profit or loss during thereporting period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight line or diminishing valuemethod to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives,as follows:

- Buildings 2.5%- Plant and equipment 7.5% - 66.60%- Leased plant 7.5% - 18.75%- Equipment held at third parties 7.5% - 33.33%

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount1(i)).(noteis greater than its estimated recoverable amount

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are includedin the income statement.

(q) Intangible assets

(i) GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the netidentifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions ofsubsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments inassociates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently ifevents or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulatedimpairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relatingto the entity sold. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill onacquisitions of associates is included in investments in associates.

Goodwill is tested for impairment in accordance with note 1(i).

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(q) (continued)Intangible assets

(ii) Brand namesBrand names have been assessed by the directors as having indefinite useful lives. This is based on an analysisof product life cycle studies and market and competitive trends which provides evidence that the products willgenerate net cash inflows for the Group for an indefinite period. Therefore, the brands are carried at cost withoutamortisation, but are tested for impairment in accordance with note 1(i).

(iii) Supply and distribution rightsSupply and distribution rights have a finite useful life and are carried at cost less accumulated amortisation andimpairment losses. Amortisation is calculated using the straight line method to allocate the cost of distributionrights over their estimated useful lives, which is 3-5 years.

(r) Trade and other payables

financial yearprior to the end ofGroupThese amounts represent liabilities for goods and services provided to thewhich are unpaid. The amounts are unsecured and are usually paid within 30-60 days of recognition.

(s) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequentlymeasured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemptionamount is recognised in profit or loss over the period of the borrowings using the effective interest method. Feespaid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it isprobable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw downoccurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, thefee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which itrelates.

has an unconditional right to defer settlement ofGroupBorrowings are classified as current liabilities unless thethe liability for at least 12 months after the reporting period.

(t) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time thatis required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(u) Provisions

Provisions for claims, discounts, rebates and allowances are recognised when the Group has a present legal orconstructive obligation as a result of past events, it is probable that an outflow of resources will be required tosettle the obligation and the amount has been reliably estimated. Provisions are not recognised for futureoperating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement isdetermined by considering the class of obligations as a whole. A provision is recognised even if the likelihood ofan outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management's best estimate of the expenditure required tosettle the present obligation at the end of each reporting period. The discount rate used to determine the presentvalue is a pre-tax rate that reflects current market assessments of the time value of money and the risks specificto the liability. The increase in the provision due to the passage of time is recognised as interest expense.

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(v) Employee benefits

(i) Short-term obligationsLiabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leaveexpected to be settled within 12 months of the reporting date are recognised in current provisions in respect ofemployees' services up to the reporting date and are measured at the amounts expected to be paid when theliabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken andmeasured at the rates paid or payable.

(ii) Other long-term employee benefit obligationsThe liability for long service leave is recognised in the provision for employee benefits and measured as thepresent value of expected future payments to be made in respect of services provided by employees up to thereporting date using the projected unit credit method. Consideration is given to expected future wage and salarylevels, experience of employee departures and periods of service. Expected future payments are discountedusing market yields at the reporting date on commonwealth government bonds with terms to maturity andcurrency that match, as closely as possible, the estimated future cash outflows.

(iii) Share-based paymentsShare-based compensation benefits are provided to employees via the Long-Term Incentive Plan and an Exempt

35.Employee Plan offer. Information relating to these schemes is set out in note

The fair value of options granted under the Long-Term Incentive Plan is recognised as an employee benefitsexpense with a corresponding increase in equity. The total amount to be expensed is determined by reference tothe fair value of the options granted, which includes any market performance conditions but excludes the impactof any service and non market performance vesting conditions and the impact of any non-vesting conditions.

Non-market vesting conditions are included in assumptions about the number of options that are expected tovest. The total expense is recognised over the vesting period, which is the period over which all of the specifiedvesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number ofoptions that are expected to vest based on the non-market vesting conditions. It recognises the impact of therevision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

(w) Contributed equity

24).(noteOrdinary shares are classified as equity

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,net of tax, from the proceeds.

If the entity reacquires its own equity instruments, for example as the result of a share buy back, thoseinstruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised inprofit or loss and the consideration paid including and directly attributable incremental costs (net of income taxes)is recognised directly in equity.

(x) Dividends

Provision is made for the amount of any dividend declared on or before the end of the financial year but notwere nil (2012: nil).30 June 2013distributed at balance date. Dividends declared but not distributed at

(y) Earnings per share

(i) Basic earnings per shareBasic earnings per share is calculated by dividing:

• the profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinaryshares

• adjusted foryear,financialby the weighted average number of ordinary shares outstanding during theshares.and excluding treasuryyearbonus elements in ordinary shares issued during the

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(y) (continued)Earnings per share(i) (continued)Basic earnings per share

(ii) Diluted earnings per shareDiluted earnings per share adjusts the figures used in the determination of basic earnings per share to take intoaccount the weighted average number of additional ordinary shares that would have been outstanding assumingthe conversion of all dilutive potential ordinary shares.

(z) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurredis not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of theasset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount ofGST recoverable from, or payable to, the taxation authority is included with other receivables or payables in thebalance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing orfinancing activities which are recoverable from, or payable to the taxation authority, are presented as operatingcash flows.

(aa)Rounding of amounts

The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and InvestmentsfinancialAmounts in thestatements.financialCommission, relating to the 'rounding off' of amounts in the

have been rounded off in accordance with that Class Order to the nearest thousand dollars, or instatementscertain cases, the nearest dollar.

(ab)New accounting standards and interpretations

30 JuneCertain new accounting standards and interpretations have been published that are not mandatory forassessment of the applicable new standard and its impact is set out below.Group'sreporting periods. The2013

(i) Disclosure of InterestsAASB 12Arrangements,JointAASB 11Statements,Consolidated FinancialAASB 10Investments inand AASB 128Separate Financial Statementsrevised AASB 127Entities,in Other

Amendments to Australian Accounting Standards arisingand AASB 2011-7Associates and Joint Ventures(effective 1 January 2013)from the Consolidation and Joint Arrangements Standards

In August 2011, the AASB issued a suite of five new and amended standards which address the accounting forjoint arrangements, consolidated financial statements and associated disclosures.

Consolidated and SeparateAASB 10 replaces all of the guidance on control and consolidation in AASB 127The core principle that aEntities.Consolidation - Special Purposeand Interpretation 12Statements,Financial

consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remainsunchanged, as do the mechanics of consolidation. However the standard introduces a single definition of controlthat applies to all entities. It focuses on the need to have both power and rights or exposure to variable returnsbefore control is present. Power is the current ability to direct the activities that significantly influence returns.Returns must vary and can be positive, negative or both. There is also new guidance on participating and

does not expect the new standard to haveGroupprotective rights and on agent/principal relationships. While thea significant impact on its composition, it has yet to perform a detailed analysis of the new guidance in the contextof its various investees that may or may not be controlled under the new rules.

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(ab) (continued)New accounting standards and interpretations(i) Disclosure of InterestsAASB 12Arrangements,JointAASB 11Statements,Consolidated FinancialAASB 10

Investments inand AASB 128Separate Financial Statementsrevised AASB 127Entities,in OtherAmendments to Australian Accounting Standards arisingand AASB 2011-7Associates and Joint Ventures

(effective 1 January 2013)from the Consolidation and Joint Arrangements Standards

AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer onthe legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to thejoint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified aseither a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and thechoice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account for theirshare of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB11 also provides guidance for parties that participate in joint arrangements but do not share joint control.

already applies the equity method in accounting for this investment, AASB 11 will not have anyGroupAs thestatements.financialimpact on the amounts recognised in its

AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 andAASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of

statements.financialwill not affect any of the amounts recognised in theGroupthis standard by the

financialwill adopt the new standards from their operative date. They will therefore be applied in theGroupThe2014.30 Junefor the annual reporting period endingstatements

(ii) Amendments to Australian Accounting Standardsand AASB 2011-8Fair Value MeasurementAASB 13(effective 1 January 2013)arising from AASB 13

AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair valuehas yet to determine which, if any, of its current measurement techniques will have toGroupdisclosures. The

change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules onHowever, application of the new standard will impactstatements.financialany of the amounts recognised in the

does not intendGroupThestatements.notes to the consolidated financialthe type of information disclosed in theto adopt the new standard before its operative date, which means that it would be first applied in the annual

2014.30 Junereporting period ending

(iii) Amendments to Australian AccountingAASB 2012-10and,Employee BenefitsRevised AASB 119(September 2012)arising from AASB 119Standards

In September 2011, the AASB released a revised standard on accounting for employee benefits. It requires therecognition of all remeasurements of defined benefit liabilities/assets immediately in other comprehensive income(removal of the so called 'corridor' method), the immediate recognition of all past service cost in profit or loss andthe calculation of a net interest expense or income by applying the discount rate to the net defined benefit liabilityor asset. This replaces the expected return on plan assets that is currently included in profit or loss. The standardalso introduces a number of additional disclosures for defined benefit liabilities/assets and could affect the timingof the recognition of termination benefits. The amendments will have to be implemented retrospectively.

The Group will apply the new standard when it becomes operative, being from 1 July 2013.

(ac)Parent entity financial information

has been prepared on36The financial information for the parent entity, Patties Foods Limited, disclosed in notethe same basis as the consolidated financial statements.

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2 Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate riskand price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on theunpredictability of financial markets and seeks to minimise potential adverse effects on the financial performanceof the Group. The Group uses derivative financial instruments such as foreign exchange contracts and interestrate swaps to hedge certain risk exposures. Where utilised, derivatives are exclusively used for hedgingpurposes, i.e. not as trading or other speculative instruments. The Group uses different methods to measuredifferent types of risk to which it is exposed. These methods include sensitivity analysis in the case of interestrate, foreign exchange and other price risks and ageing analysis for credit risk.

Risk management is carried out by management under a framework approved by the Board of Directors.

(a) Market risk

(i) Foreign exchange riskThe Group is exposed to foreign exchange risk arising from various currency exposures, including US dollar,Euro and NZ dollar.Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities aredenominated in a currency that is not the entity's functional currency. These commercial transactions relate to theprocurement of raw materials, finished goods and items of plant and equipment. Export sales represent less than1% of the Group's sales revenue and therefore are not recognised as a source of foreign exchange risk.Management determined that some specific hedges were required for FY2013 and FY2012 for purchases ofspecific items of plant and equipment and commodity based raw material inputs. The Group’s risk managementpolicy, approved by the Board of Directors, includes a requirement to hedge approximately 70%-80% of theidentifiable foreign exchange requirements for a 6 to 9 month period to provide some certainty in its cost of rawmaterials and 100% of the purchase cost of plant and equipment when the commitment is approved. No otherhedging activities took place as the exposure was immaterial to the Group's overall result. Management willcontinue to review this exposure and take actions to hedge exposure if deemed appropriate.

exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar,Group'sThewas as follows:

30 June 2013 30 June 2012

USD$'000

NZD$'000

EUR$'000

USD$'000

NZD$'000

EUR$'000

Trade payables (3,760) (82) (20) (1,730) (73) (109)Forward exchange contracts- buy foreigncurrency (cashflow hedges) 7,509 62 - 3,714 86 617Net exposure 3,749 (20) (20) 1,984 13 508

The market risk due to foreign exchange movements is not material in terms of the possible impact on profit orloss or total equity.

(ii) Cash flow and fair value interest rate riskThe Group's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates exposethe Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interestrate risk.Group policy is to maintain approximately 50% of its borrowings at fixed rates using interest rate swaps toachieve this when necessary. During 2013 and 2012, the Group’s borrowings were at both fixed (through interestrate swaps) and variable rates and were denominated in Australian Dollars. During 2013, the Group's variableinterest rate was based on BBSY and a margin.

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2 (continued)Financial risk management

(a) (continued)Market risk

(ii) (continued)Cash flow and fair value interest rate riskhad the following variable rate borrowings and interest rate swapGroupAs at the end of the reporting date, the

contracts outstanding:

Consolidated2013$'000

2012$'000

Bank overdrafts and bank bills 68,080 70,666Interest rate swaps (notional principal amount) (35,000) (26,250)Net exposure to cash flow interest rate risk 33,080 44,416

if interest rates had changed by +/- 100 basis points from the year end rates with all other2013,30 JuneAtvariables held constant, post tax profit for the year would have been $272,000 lower/higher (2012 - $256,000lower/higher), mainly as a result of higher/lower interest expense from variable rate borrowings.

(b) Credit risk

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks andfinancial institutions, as well as credit exposures to wholesale and retail customers, including outstandingreceivables and committed transactions. For banks and financial institutions, only independently rated partieswith a minimum rating of 'A' are accepted. For customers, management assesses the credit quality of thecustomer, taking into account its financial position, past experience and other factors. Compliance with creditlimits by customers is regularly monitored by line management.In addition, trade credit insurance is taken over the non-grocery customer base. The maximum exposure to creditrisk at the reporting date is the carrying amount of the financial assets less the proceeds from applicableinsurance recoveries.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability offunding through an adequate amount of committed credit facilities and the ability to close out market positions.The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching thematurity profiles of financial assets and liabilities.

Financing arrangementshad access to the following undrawn borrowing facilities at the reporting date:GroupThe


2012$'000

Expiring beyond one year 18,750 13,059

The undrawn facilities may be drawn at any time and are subject to annual review.

Maturities of financial liabilitiesThe tables below analyse the Group’s financial liabilities and gross settled derivative financial instruments intorelevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date.The amounts disclosed in the table are the contractual undiscounted cash flows. For interest rate swaps the cashflows have been estimated using forward interest rates applicable at the reporting date.

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(c) (continued)Liquidity risk

Contractual maturities of financial liabilitiesLess than

12months

Between1 and 5years

Totalcontrac-

tualcashflows

Carryingamount(assets)/liabilities

30 June 2013At

$'000 $'000 $'000 $'000Non-derivativesNon-interest bearing 32,893 - 32,893 32,893Variable rate* 2,654 70,042 72,696 70,666Total non-derivatives 35,547 70,042 105,589 103,559DerivativesInterest rate swaps- net settled - - - (717)Forward foreign exchange contracts- (inflow) (7,017) - (7,017) -- outflow 7,572 - 7,572 -- total - - - 555Total derivatives 555 - 555 (162)

Less than12

months

Between1 and 5years

Totalcontrac-

tualcashflows

Carryingamount(assets)/liabilities

30 June 2012At

$'000 $'000 $'000 $'000Non-derivativesNon-interest bearing 28,074 - 28,074 28,074Variable rate* 2,277 76,450 78,727 70,666Total non-derivatives 30,351 76,450 106,801 98,740DerivativesInterest rate swaps- net settled - - - (917)Forward foreign exchange contracts- (inflow) (4,727) - (4,727) -- outflow 4,622 - 4,622 -- total - - - (105)Total derivatives (105) - (105) (1,022)

* Management has arrived at the contractual cash flows for variable rate non derivatives, based on budgeted variable interestrates.

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(d) Fair value measurements

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement orfor disclosure purposes.

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of thefollowing fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either

directly (as prices) or indirectly (derived from prices) (level 2), and(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level

3).

30 Juneassets and liabilities measured and recognised at fair value atGroup'sThe following table presents the2012:30 Juneand2013

At 30 June 2013Level 1

$'000Level 2

$'000Level 3

$'000Total$'000

Derivatives used for hedging - (162) - (162)

At 30 June 2012Level 1$'000

Level 2$'000

Level 3$'000

Total$'000

Derivatives used for hedging - (1,020) - (1,020)

The fair value of financial instruments that are not traded in an active market (for example, over-the-counterderivatives) is determined using valuation techniques. The Group uses a variety of methods and makesassumptions that are based on market conditions existing at the end of each reporting period. The fair value ofinterest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forwardexchange contracts is determined using forward exchange market rates at the end of the reporting period. Theseinstruments are included in level 2 and comprise derivative financial instruments.

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that may have a financial impact on the entity and that are believed to bereasonable under the circumstances.

(a) Critical accounting estimates and assumptions

makes estimates and assumptions concerning the future. The resulting accounting estimates will, byGroupThedefinition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of

arefinancial yearcausing a material adjustment to the carrying amounts of assets and liabilities within the nextdiscussed below.

(i) Estimated impairment of goodwill and indefinite lived intangiblesThe Group tests annually, or more frequently if events or changes in circumstances indicate that it might beimpaired, whether goodwill and indefinite lived intangibles have suffered any impairment, in accordance with the

The recoverable amounts of cash-generating units have been determined1(q).accounting policy stated in notebased on the higher of an asset's fair value less costs to sell and value-in-use. These calculations require the use

for details of these assumptions and the potential impact of changes to the16of assumptions. Refer to noteassumptions.

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3 (continued)Critical accounting estimates and judgements

(a) (continued)Critical accounting estimates and assumptions(ii) Income taxesThe Group is subject to income taxes in Australia. Significant judgement is required in determining the provisionfor income taxes, in particular, research and development. The Group recognises liabilities for anticipated taxissues based on the Group’s current understanding of the tax law. Where the final tax outcome of these mattersis different from the amounts that were initially recorded, such differences will impact the current and deferred taxprovisions in the period in which such determination is made.Were the actual final outcomes (on the judgement areas) to differ by 20% from management’s estimates, theGroup would need to:- increase the income tax liability by $100,000 and the income tax expense by $100,000 if unfavourable, or- decrease the income tax liability by $100,000 and the income tax expense by $100,000 if favourable.

(iii) Indefinite lived intangiblesManagement has determined that deferred tax assets and deferred tax liabilities associated with indefinite livedintangibles should be measured using the tax consequences that would follow from the sale of that asset. This ison the basis that these assets are not amortised and therefore the carrying amount of the asset reflects the valuerecoverable from the sale of the asset.Should this assumption change and management determine that the carrying value is greater than the valuerecoverable from sale, and record a significant impairment charge, there will be an associated change in thevalue of the deferred tax assets and tax liabilities which would be taken through that year's earnings.

4 Segment information

The economic entity operated predominantly in one operating segment during the year, being the manufactureand marketing of frozen food products throughout Australia.Management has determined the operating segments based on the reports reviewed by the Patties LeadershipTeam that are used to make strategic decisions. Results are reviewed on a whole-of-business basis.

(i) Segment revenueConsolidated

2013$'000

2012$'000

Total segment revenue 244,141 235,040Interest revenue 41 44Other revenue 626 759Total revenue from continuing operations (note 5) 244,808 235,843

The entity is domiciled in Australia. Over 99% of its revenue is derived from external customers in Australia, withthe remainder being exports.

(2012:Of the total revenue, $138,516,000, or 56.6%, is derived from three significant external customers$134,121,000, or 57.3%).

$58,429,000) from the(2012:$52,643,000) from the first customer, $65,609,000(2012:This is split $53,329,000$23,049,000) from the third customer.(2012:second customer and $19,578,000

(ii) Segment assetsThe total of non-current assets other than financial instruments and deferred tax assets (there are noemployment benefit assets and rights arising under insurance contracts) located in Australia is $160,863,000

- $nil).(2012- $157,124,000). There are no non-current assets located in other countries(2012

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5 Revenue


2012$'000

From continuing operationsSales revenueSale of goods 244,141 235,040Other revenueRent 55 120Interest 41 44Caravan Park receipts 571 639

667 803

244,808 235,843

6 Other income


2012$'000

Government grants (a) 12 9Sundry income 3 4Royalties - 35

15 48(a) Government grants

Regional development and environmental grants of $11,500 (2012: $9,200) were recognised as other income bythe Group during the financial year. There are no unfulfilled conditions or contingencies attached to these grants.The Group did not benefit from any other forms of government assistance.

7 Expenses


2012$'000

Profit before income tax includes the following specificexpenses:

DepreciationBuildings 1,115 994Property, plant and equipment 6,128 5,488

Total depreciation 7,243 6,482

AmortisationIntangible assets 413 570

Employee benefits expensesEmployee benefits expense 46,661 42,577

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7 (continued)Expenses

Finance expensesInterest and finance charges paid/payable 4,328 5,299

Amount capitalised (a) (312) (410)

Finance costs expensed 4,016 4,889

Rental expense relating to operating leasesMinimum lease payments 2,227 2,068

Research and development 755 628

Impairment losses - financial assetsTrade receivables 65 46

Significant items (b)Australian Convenience Foods Pty Ltd Trade receivable provision 587 -Impairment loss - frozen fruit product business 11,817 -

Total Significant items 12,404 -

(a) Capitalised borrowing costs

The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average7.00%).(2012:in this case 7.00%year,interest rate applicable to the entity's outstanding borrowings during the

(b) Significant Items

The provision for Australian Convenience Foods Pty Ltd trade receivable has been classified in the Consolidatedstatement of comprehensive income as an Administration Expense. It is not included in the trade receivablesimpairment losses above.

The impairment charge of $11,817,000 arose in the Frozen fruit product business primarily due to risingcommodity prices, foreign exchange movements and volatility within the frozen fruit product category.

8 Income tax expense

(a) Income tax expenseConsolidated

2013$'000

2012$'000

Current tax 5,955 7,374Deferred tax (211) (292)(Under)/over provision of current tax in prior periods (3) 231

5,741 7,313Deferred income tax (revenue) expense included in income tax expensecomprises:(Increase) decrease in deferred tax assets (note 15) (68) (139)(Decrease) increase in deferred tax liabilities (note 22) (143) (153)

(211) (292)

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8 (continued)Income tax expense

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Profit from continuing operations before income tax expense 10,530 26,795Tax at the Australian tax rate of 30% (2012 - 30%) 3,159 8,038Tax effect of amounts which are not deductible (taxable)in calculating taxable income:

Goodwill impairment 3,545 -Entertainment 21 22Share of net profit of associates (515) (357)Sundry items (5) 4Legal fees 3 3Research and development (500) (500)Share option expenses 36 (128)

5,744 7,082Adjustments for current tax of prior periods (3) 47Adjustments for deferred tax of prior periods - 184

(3) 231Total income tax expense 5,741 7,313

(16,271) (34,108)(c) Amounts recognised directly in equity

Aggregate current and deferred tax arising in the reporting period and notrecognised in net profit or loss or other comprehensive income but directlydebited or credited to equity:

Net deferred tax - debited (credited) directly to equity (258) 168

9 Assets held for sale

Assets classified as held for saleConsolidated

2013$'000

2012$'000

Disposal group held for saleLand and Buildings - 1,650

The Existing Contract for 100% of the land was rescinded for no consideration and a new Contract of Sale for thesale and purchase of a 50% interest in the Land was entered into and settled by Patties and the trustee of theDavies Family Trust.

10 Current assets - Cash and cash equivalents


2012$'000

Cash in hand 1 1Cash at bank 67 150

68 151

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10 (continued)Current assets - Cash and cash equivalents

(a) Cash in hand

This is non interest bearing.

(b) Cash at bank

- 3.42%).(2012The average effective interest rate on short-term bank deposits was 2.16%

11 Current assets - Receivables


2012$'000

Trade receivables 57,699 52,807Provision for claims, discounts, rebates and allowances (8,432) (5,680)Provision for impairment of receivables - (46)

49,267 47,081Other receivablesOther receivables (b) 2,296 1,515Employee share purchase loans 44 3

2,340 1,518Prepayments 2,354 2,811

53,961 51,410(a) Credit risk

The aging of the Group's trade receivables at the reporting date was:


2012$'000

Not past due 51,827 48,927Past due 1-30 days 3,485 2,991Past due 31-60 days 1,095 (184)Past due 60+ days 1,292 1,073

57,699 52,807

- $46,310).(2012there was a $nil impairment in trade receivables2013,30 JuneAs of

The maximum exposure to credit risk for trade receivables at the reporting date is the carrying amount of thefinancial assets less the proceeds from applicable insurance recoveries.

Movements in the provision for impairment of receivables are as follows:


2012$'000

At 1 July 46 -Provision for impaired receivables recognised during the year 606 46Receivables written off during the year as uncollectible (652) -

- 46

The other classes within trade and other receivables do not contain impaired assets and are not past due (note2(b)). Based on the credit history of other receivables, these amounts are expected to be received when due.

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11 (continued)Current assets - Receivables

(b) Other receivables

These amounts generally arise from transactions outside the usual operating activities of the group.

(c) Fair value

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fairvalue.

12 Current assets - Inventories


2012$'000

Raw materials and stores- at cost 13,134 12,486Finished goods- at cost 25,101 23,541Other inventories- at cost 242 89Spare parts- at cost 2,448 1,864

40,925 37,980(a) Inventory expense

$112,078,408).(2012:amounted to $115,764,02130 June 2013Inventories expensed during the year endedamounted to $620,97730 June 2013Inventories written down to net realisable value during the year ended

$381,322).(2012:

13 Non-current assets - Investments accounted for using the equity method


2012$'000

Interest in associates 9,888 9,072

Investments in associates are accounted for in the consolidated financial statements using the equity method ofaccounting (refer note1(b)(ii)).

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14 Non-current assets - Property, plant and equipment

Constructionin progress

$'000

Land andbuildings

$'000

Plant andequipment

$'000

Leased plantand

equipment$'000

Equipmentheld at 3rd

parties$'000

Total$'000

At 1 July 2011Cost or fair value 6,224 27,026 69,151 119 6,461 108,981Accumulateddepreciation - (4,312) (32,967) (58) (3,937) (41,274)Net book amount 6,224 22,714 36,184 61 2,524 67,707Year ended 30 June 2012Opening net bookamount 6,224 22,714 36,184 61 2,524 67,707Additions 6,499 437 2,316 - 502 9,754Depreciationcharge - (993) (4,829) (12) (647) (6,481)Transfers (5,705) 2,731 3,023 (49) - -Assets classifiedas held for saleadd back - (1,651) - - - (1,651)Closing net bookamount 7,018 23,238 36,694 - 2,379 69,329At 30 June 2012Cost or fair value 7,018 28,543 74,463 97 6,963 117,084Accumulateddepreciation - (5,305) (37,769) (97) (4,584) (47,755)Net book amount 7,018 23,238 36,694 - 2,379 69,329

Year ended 30 June 2013Opening net bookamount 7,018 23,238 36,694 - 2,379 69,329Additions 8,116 - 966 - 647 9,729Depreciationcharge - (1,115) (5,395) - (732) (7,242)Transfers (12,612) 133 12,478 - 1 -Assets classifiedas held for saleadd back - 849 - - - 849Closing net bookamount 2,522 23,105 44,743 - 2,295 72,665At 30 June 2013Cost 2,522 29,525 88,004 - 7,611 127,662Accumulateddepreciation - (6,420) (43,261) - (5,316) (54,997)Net book amount 2,522 23,105 44,743 - 2,295 72,665

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15 Non-current assets - Deferred tax assets

ConsolidatedNotes 2013

$'0002012$'000

The balance comprises temporary differences attributable to:Employee benefits 1,464 1,345Capitalised transaction costs 238 238Cash flow hedges 49 307Fixed assets 68 98

1,819 1,988OtherDoubtful debts - 14Accruals 137 133Sub-total other 137 147

Total deferred tax assets 1,956 2,135

Set-off of deferred tax liabilities pursuant to set-off provisions 22 (1,956) (2,135)Net deferred tax assets - -Deferred tax assets expected to be recovered after more than 12 months 1,956 2,135

Movements -Consolidated

EmployeeBenefits

$'000

Fixedassets

$'000

Capitalisedtransaction

costs$'000

Cash flowhedges

$'000

Impairedreceivables

$'000Other$'000

Total$'000

At 1 July 2011 1,167 - 194 93 - 245 1,699

- to profit or loss 177 98 44 47 14 (112) 268- directly to equity - - - 168 - - 168At 30 June 2012 1,344 98 238 308 14 133 2,135

(Charged)/credited- to profit or loss 119 (30) - (210) (14) 5 (130)- directly to equity - - - (49) - - (49)At 30 June 2013 1,463 68 238 49 - 138 1,956

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16 Non-current assets - Intangible assets

Goodwill$'000

Brands$'000

Supply &distribution

rights$'000

Other$'000

Non-competecovenant

$'000Total$'000

At 1 July 2011Cost 12,021 65,486 1,544 943 85 80,079Accumulationamortisation andimpairment - - (635) (501) - (1,136)Net book amount 12,021 65,486 909 442 85 78,943Year ended 30 June 2012Opening net bookamount 12,021 65,486 909 442 85 78,943Acquisition - - - 350 - 350Amortisationcharge* - - (326) (159) (85) (570)Closing net bookamount 12,021 65,486 583 633 - 78,723Cost 12,021 65,486 1,544 1,292 - 80,343Accumulationamortisation andimpairment - - (961) (659) - (1,620)Net book amount 12,021 65,486 583 633 - 78,723

At 30 June 2012Cost 12,021 65,486 1,544 1,292 - 80,343Accumulationamortisation andimpairment - - (961) (659) - (1,620)Net book amount 12,021 65,486 583 633 - 78,723Year ended 30 June 2013Opening net bookamount 12,021 65,486 583 633 - 78,723Amortisationcharge* - - (250) (163) - (413)Impairmentcharge (11,196) (621) - - - (11,817)Closing net bookamount 825 64,865 333 470 - 66,493

At 30 June 2013Cost 825 64,865 1,544 1,292 - 68,526Accumulatedamortisation - - (1,211) (822) - (2,033)Net book amount 825 64,865 333 470 - 66,493

- $570,000) is included in depreciation and amortisation expense in profit or loss.(2012* Amortisation of $413,000

(a) Impairment tests for goodwill and intangible assets with indefinite useful lives

Goodwill and intangible assets with indefinite useful lives are allocated to the Group's cash-generating units(CGU).

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16 (continued)Non-current assets - Intangible assets

(a) (continued)Impairment tests for goodwill and intangible assets with indefinite useful lives

The recoverable amount of a CGU is determined based on value-in-use calculations. The calculations use cashflow projections based on financial forecasts approved by management covering a five-year period. Cash flowsbeyond the five-year period have a residual value calculated using the estimated long term growth rates.The growth rate is the mid-range of consensus of the long term growth rates.

2013Goodwill

$'000Brands

$'000

Sweet and savoury frozen bakery product business* 825 54,565Frozen fruit product business - 10,300

825 64,865

2012 Goodwill$'000

Brands$'000

Sweet and savoury frozen bakery product business* 825 54,565Frozen fruit product business 11,196 10,921

12,021 65,486

* includes the caravan park business previously reported as a separate cash generating unit, as cash flows have beendetermined to be not largely independent.

(b) Key assumptions used for value-in-use calculations

CGU Growth rate ** Discount rate ***2013

%2012

%2013

%2012

%Sweet and savoury frozen bakery productbusiness 7.7 6.2 12.3 14.3Frozen fruit product business 3.7 7.9 12.3 14.3

** Growth rate used to extrapolate cash flows beyond the one year budget period for the forecast period to 2018.A 2.4% growth rate has been applied beyond 2018.*** The discount rates used are pre-tax and are based on the company weighted average cost of capital.

These assumptions have been used for the analysis of each CGU. Management determined budgeted grossmargin based on past performance and its expectations for the future. The growth rates used are consistent withforecasts included in industry reports. The discount rates used reflect specific risks relating to the relevant CGUand the markets in which they operate.

(c) Impairment of Frozen fruit product business

The impairment charge of $11,817,000 arose in the Frozen fruit product business primarily due to risingcommodity prices, foreign exchange movements and volatility within the frozen fruit product category.

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16 (continued)Non-current assets - Intangible assets

(d) Impact of possible changes in key assumptions

Sweet and savoury frozen bakery product businessManagement does not consider that any reasonably possible change in any of the key assumptions may result inthe CGU carrying amount exceeding the recoverable amount.

Frozen fruit product businessManagement considers that reasonably possible changes in the key assumptions would result in the CGUcarrying amount further exceeding the recoverable amount.

If the budgeted growth rate used in the value-in-use calculation for the Frozen fruit product business had been1% lower than management’s estimates (2.7% instead of 3.7%) at 30 June 2013, the group would haverecognised a further impairment of $1,690,000.

If the pre-tax discount rate applied to the cash flow projections of this CGU had been 1% higher thanmanagement’s estimates (13.3% instead of 12.3%), the group would have recognised a further impairment of$2,086,000.

In 2012 there were no reasonably possible changes in any of the key assumptions that would have caused thecarrying amount of the Frozen fruit product business to exceed its recoverable amount.

17 Current liabilities - Payables


2012$'000

Trade payables 24,543 22,980Other payables 7,862 3,919

32,405 26,899(a) Risk exposure

2.exposure to foreign exchange risk is provided in noteGroup'sInformation about the

18 Current liabilities - Borrowings


2012$'000

SecuredBank bills(a) 2,500 2,124Bank overdrafts 1,830 -Total secured current borrowings 4,330 2,124

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18 (continued)Current liabilities - Borrowings

(a) Bank bills

Relates to a portion of a bill facility that expires within 12 months.

(b) Interest rate risk exposures

2.Details of the Group's exposure to interest rate changes on borrowings are set out in note

(c) Fair value disclosures

21.Details of the fair value of borrowings for the Group are set out in note

(d) Security

Details of the security relating to each of the secured liabilities and further information on the bank bills are set21.out in note

19 Derivative financial instruments


2012$'000

Current assetsForward foreign exchange contracts - cash flow hedges((a)(i)) 557 -Total current derivative financial instrument assets 557 -

Current liabilitiesForward foreign exchange contracts - cash flow hedges 2 105Total current derivative financial instrument liabilities 2 105

Non-current liabilitiesInterest rate swaps - cash flow hedges 717 917Total non current derivative financial instrument liabilities 717 917

Total derivative financial instrument liabilities 719 1,022

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19 (continued)Derivative financial instruments

(a) Instruments used by the Group

The Group is party to derivative financial instruments in the normal course of business in order to hedgeexposure to fluctuations in interest and foreign exchange rates in accordance with the Group’s financial riskmanagement policies (refer to note 2).

(i) Forward foreign exchange contracts - cash flow hedgesThe Group uses raw materials purchased from the United States, Europe, China and South America. In order toprotect against exchange rate movements, the Group has entered into forward exchange contracts to purchaseUS dollars, NZ dollars and Euros.These contracts are hedging highly probable forecasted purchases for the ensuing financial year. The contractsare timed to mature when payments for shipments of raw materials are scheduled to be made.The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge isrecognised directly in equity. When the cash flows occur, the Group adjusts the initial measurement of thecomponent recognised in the balance sheet by the related amount deferred in equity.There was no hedge ineffectiveness in the current or prior year.

(ii) Interest rate swap contracts - cash flow hedgesBank loans of the Group currently bear a variable interest rate. It is policy to protect part of the loans fromexposure to fluctuations in interest rates. Accordingly, the Group has entered into interest rate swap contractsunder which it is obliged to receive interest at variable rates and to pay interest at fixed rates.

- 39%) of the variable loan principal outstanding and(2012Swaps currently in place cover approximately 51%are timed to expire as each loan repayment falls due.The contracts require settlement of net interest receivable or payable each 30 days. The settlement datescoincide with the dates on which interest is payable on the underlying debt. The contracts are settled on a netbasis.The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedgingreserve, to the extent that the hedge is effective, and reclassified into profit and loss when the hedged interest

a loss of $475,042 was reclassified into profit and loss30 June 2013expense is recognised. In the year ended- loss of $265,580) and included in finance cost. There was no hedge ineffectiveness in the current year.(2012

(b) Risk exposures and fair value measurements

Information about the group's exposure to credit risk, foreign exchange and interest rate risk and about themethods and assumptions used in determining fair values is provided in note 2. The maximum exposure to creditrisk at the end of the reporting period is the carrying amount of each class of derivative financial assetsmentioned above.

20 Current liabilities - Provisions


2012$'000

Employee benefits (a) 3,508 3,400

(a) Amounts not expected to be settled within 12 months

The current provision for employee benefits includes accrued annual leave, vesting sick leave and long serviceleave. For long service leave it covers all unconditional entitlements where employees have completed therequired period of service and also those where employees are entitled to pro-rata payments in certain

does not have anGroupcircumstances. The entire amount of the provision is presented as current, since theunconditional right to defer settlement for any of these obligations. However, based on past experience, the

does not expect all employees to take the full amount of accrued leave or require payment within the nextGroup12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12months.

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20 (continued)Current liabilities - Provisions

(a) (continued)Amounts not expected to be settled within 12 months


2012$'000

Leave obligations expected to be settled after 12 months 1,371 1,083

21 Non-current liabilities - Borrowings


2012$'000

Bank bills 63,750 68,542Total secured non-current borrowings 63,750 68,542

(a) Secured liabilities and assets pledged as security

and non-current) are as follows:18)The total secured liabilities (current (note

Bank bills 66,250 70,666Bank overdrafts 1,830 -Total secured liabilities 68,080 70,666

The bank bills and overdraft are secured by first ranking fixed and floating charges over all the assets andundertakings of the Group and first ranking registered mortgages over the Group's freehold land and buildings.The Group is subject to certain covenants within the bank facility.

The carrying amounts of assets pledged as security for current and non-current borrowings are:


2012$'000

CurrentFloating charge

Cash and cash equivalents (1,762) 151Receivables 53,961 51,410Inventories 40,925 37,980

Total current assets pledged as security 93,124 89,541Non-currentFirst mortgage

Freehold land and buildings 23,105 23,238Floating charge

Other financial assets 9,888 9,072Plant and equipment 44,742 36,694

Total non-current assets pledged as security 77,735 69,004

Total assets pledged as security 170,859 158,545

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21 (continued)Non-current liabilities - Borrowings

(b) Fair value

The carrying amounts and fair values of borrowings at the end of the reporting period are:

At 30 June 2013 At 30 June 2012Carryingamount

$'000Fair value

$'000

Carryingamount

$'000Fair value

$'000On-balance sheetNon-traded financial liabilitiesBank bills 66,250 66,250 70,666 70,666

66,250 66,250 70,666 70,666

The fair value of borrowings equals their carrying amounts, as they are at variable interest rates.

(c) Risk exposures

2.exposure to interest rate and foreign exchange risk is provided in noteGroup'sInformation about the

22 Non-current liabilities - Deferred tax liabilities


2012$'000

The balance comprises temporary differences attributable to:Brand names 6,500 6,500Intangible assets 187 307Unrealised foreign exchange gains - 16Depreciation 1,300 1,307Total deferred tax liabilities 7,987 8,130

Set-off of deferred tax assets pursuant to set-off provisions (note 15) (1,956) (2,135)Net deferred tax liabilities 6,031 5,995Movements:Opening balance 1 July 8,130 7,742Charged/(Credited) to the income statement (143) 388Closing balance at 30 June 7,987 8,130Deferred tax liabilities expected to be settled after more than 12 months 7,987 8,130

7,987 8,130

23 Non-current liabilities - Provisions


2012$'000

Employee benefits 1,370 1,083

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24 Contributed equity

(a) Share capital30 June

2013Shares

30 June2012

Shares

30 June2013$'000

30 June2012$'000

Ordinary shares - fully paid 139,065,639 138,989,223 68,571 68,443

(b) Movements in ordinary share capital

Date DetailsNumber of

shares $'000

1 July 2012 Opening balance 138,989,223 68,443

30 June 2012 Balance 138,989,223 68,443

Employee share scheme issues 76,416 128

30 June 2013 Balance 139,065,639 68,571

(c) Ordinary shares

in proportion to theCompanyOrdinary shares participate in dividends and the proceeds on winding up of thenumber of shares held.At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise eachshareholder has one vote on a show of hands.

(d) Employee share scheme

Information relating to the employee share scheme, including details of shares issued under the scheme, is set35.out in note

(e) Options and performance rights

Information relating to the Long-Term Incentive Plan, including details of options & performance rights issued,and options & performance rights outstanding at the endfinancial yearexercised, lapsed and forfeited during the

35.is set out in noteyear,financialof the

(f) Capital risk management

objectives when managing capital are to safeguard its ability to continue as a going concern, so thatGroup'sTheand benefits for other stakeholders and to maintain an optimalshareholdersit can continue to provide returns for

capital structure to reduce the cost of capital.

may adjust the amount of dividends paid toGroupIn order to maintain or adjust the capital structure, theissue new shares or sell assets to reduce debt.shareholders,return capital toshareholders,

Consistently with others in the industry, the Group monitors capital on the basis of maintaining its capitaladequacy ratio above 45%. This ratio is calculated as total net worth divided by total assets. Total net worth isdefined as net assets. This capital requirement is imposed on the Group by its banking covenants.

54%).(2012:was 56%2013The capital adequacy ratio for

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25 Reserves and retained earnings

(a) ReservesConsolidated

2013$'000

2012$'000

Hedging reserve - cash flow hedges (113) (714)Share-based payments reserve 119 -

6 (714)

Movements:Hedging reserve - cash flow hedges

Opening balance 1 July (714) (323)Revaluation 858 (560)Deferred tax (257) 169

Balance 30 June (113) (714)Movements:Share-based payments reserve

Balance 1 July - 427Option expense / (gain) 119 (427)

Balance 30 June 119 -

(b) Retained earningsMovements in retained earnings were as follows:

Balance 1 July 68,328 59,965Net profit for the year 4,789 19,482Dividends 26 (10,567) (11,119)Balance 30 June 62,550 68,328

(c) Nature and purpose of reserves(i) Hedging reserve - cash flow hedgesThe hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are

Amounts are transferred to the income statement when1(o).as described in noteequity,recognised directly inthe associated hedged transaction affects profit and loss.

(ii) Share-based payments reserveThe share-based payments reserve is used to recognise:

• the grant date fair value of options issued to employees but not exercised• accrued expense for shares issued but not granted in the prior year

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26 Dividends

(a) Ordinary sharesConsolidated

2013$'000

2012$'000

Final ordinary dividend for the year ended 30 June 2012 of 4.4 cents (2011-4.2 cents)per fully paid share paid on 7 October 2012.

Fully franked based on tax paid @ 30% - 4.2 cents (2011 - 4.2 cents) pershare 6,116 5,838

Interim ordinary dividend for the year ended 30 June 2013 of 3.2 cents (2012-3.8 cents)per fully paid share paid on 12 April 2013

Fully franked based on tax paid @ 30% - 3.2 cents (2012 - 3.8 cents) pershare 4,451 5,281

Total dividends provided for or paid 10,567 11,119

Dividends paid in cash during the years ended 30 June 2013 and 2012 were asfollows:Paid in cash 10,567 11,119

(b) Dividends not recognised at the end of the reporting period

In addition to the above dividends, since year end the directors haverecommended the payment of a final dividend of 3.9 cents per fully paid ordinaryshare (2012 - 4.4 cents), fully franked based on tax paid at 30%. The aggregateamount of the proposed dividend expected to be paid on 8 October 2013 out ofretained earnings at 30 June 2013, but not recognised as a liability at year end, is 5,424 6,116

(c) Franked dividends

will be franked out of existing30 June 2013The franked portion of the final dividends recommended after2013.30 Juneyear endedfranking credits or out of franking credits arising from the payment of income tax in the


2012$'000

Franking credits available for subsequent reporting periods based on a tax rate of30% (2012 - 30%) 19,747 18,124

The above amounts represent the balance of the franking account as at the end of the reporting period, adjustedfor:

(a) franking credits that will arise from the payment of the amount of the provision for income tax;(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;

and(c) franking credits that will arise from the receipt of dividends recognised as receivables at the end of each

reporting period.

entity if distributableparentamounts include franking credits that would be available to theconsolidatedTheprofits of subsidiaries were paid as dividends.

The impact on the franking account of the dividend recommended by the directors since year end, but not$2,620,940).(2012:recognised as a liability at year end, will be a reduction in the franking account of $2,324,383

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27 Key management personnel disclosures

(a) Directors

The following persons were directors of Patties Foods Limited during the financial year:

(i) Chairman - non-executiveMark G Smith (appointed 22 April 2013)Chris J Riordan (resigned 22 April 2013)

(ii) Executive directorsGregory J Bourke, Managing Director

(iii) Non-executive directorsGregory J Dhnaram;J Curt Leonard, (Deputy Chairman);Henricus J Rijs;Richard C Rijs; andJohn P Schmoll

(b) Other key management personnel

The following also had authority and responsibility for planning, directing and controlling the activities of theGroup directly or indirectly, during the financial year:

Michael Knaap Chief Financial OfficerGrant Leyden General Manager, ManufacturingMark Connolly (resigned 28 June 2013) General Manager, MarketingJeff Pentney General Manager, People & OrganisationTim Peters Head of SalesMark Kluver General Manager, Customer Service & Logistics

(c) Key management personnel compensationConsolidated

2013$

2012$

Short-term employee benefits 2,346,081 2,339,162Post-employment benefits 238,129 298,890Long-term benefits 23,512 15,953Share-based payments 118,644 (427,245)

2,726,366 2,226,760

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27 (continued)Key management personnel disclosures

(d) Equity instrument disclosures relating to key management personnel

(i) Options and performance rights provided as remuneration and shares issued on exercise of such optionsand performance rights

Details of options and performance rights provided as remuneration and shares issued on the exercise of suchoptions and performance rights, together with terms and conditions of the options and performance rights, can be

28.-11found in the remuneration report on pages

(ii) Option and performance rights holdingsfinancialheld during theCompanyThe numbers of options and performance rights over ordinary shares in theincludingCompany,and other key management personnel of thePatties Foods Limitedofdirectorby eachyear

their personally related parties, are set out below.

2013Name

Balance atstart of the

year

Grantedas

compen-sation Exercised Lapsed

Balanceat end ofthe year

Vested andexercisable Unvested

Directors of Patties Foods LimitedGregory J Bourke 600,000 308,800 - (600,000) 308,800 - 308,800Other key management personnel of the GroupMichael Knaap 300,000 154,400 - (300,000) 154,400 - 154,400Grant Leyden 300,000 154,400 - (300,000) 154,400 - 154,400Mark Connolly (resigned28 June 2013) 150,000 77,200 - (227,200) - - -Jeff Pentney 150,000 77,200 - (150,000) 77,200 - 77,200Tim Peters 300,000 154,400 - (300,000) 154,400 - 154,400Mark Kluver 150,000 77,200 - (150,000) 77,200 - 77,200

2012Name

Balance atstart of the

year

Grantedas

compen-sation Exercised Lapsed

Balance atend of the

yearVested andexercisable Unvested

Directors of Patties Foods LimitedGregory J Bourke 1,200,000 - - (600,000) 600,000 - 600,000Other key management personnel of the GroupMichael Knaap 600,000 - - (300,000) 300,000 - 300,000Grant Leyden 600,000 - - (300,000) 300,000 - 300,000Mark Connolly(resigned 28 June2013) 300,000 - - (150,000) 150,000 - 150,000Jeff Pentney 300,000 - - (150,000) 150,000 - 150,000Tim Peters 600,000 - - (300,000) 300,000 - 300,000Mark Kluver 150,000 - - - 150,000 - 150,000

(iii) Share holdingsPatties Foods Limitedofdirectorby eachfinancial yearheld during theCompanyThe numbers of shares in the

including their personally related parties, are set out below.Group,and other key management personnel of theThere were no shares granted during the reporting period as compensation.

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27 (continued)Key management personnel disclosures

(d) (continued)Equity instrument disclosures relating to key management personnel(iii) (continued)Share holdings

2013

Name

Balance atthe start of

the year

Received duringthe year on the

exercise of options

Otherchanges

during theyear


year

Directors of Patties Foods LimitedOrdinary shares

Mark G Smith - Chairman - - - -Chris J Riordan (resigned 22 April 2013) 130,372 - (130,372) -Gregory J Bourke 367,500 - (297,500) 70,000Richard C Rijs 14,504,950 - (5,743,045) 8,764,905Henricus J Rijs 8,177,277 - 1,068,609 9,245,886Gregory J Dhnaram 200,000 - - 200,000J Curt Leonard 2,163,547 - 11,824 2,175,351John Schmoll 90,000 - (40,000) 50,000Other key management personnel of the GroupOrdinary shares

M Knaap 119,025 - (117,791) 1,234G Leyden 826 - - 826M Connolly (resigned 28 June 2013) 19,076 - (19,076) -J Pentney 840 - - 840T Peters 8,000 - - 8,000M Kluver 11,901 - (11,075) 825

2012

NameBalance atthe start of

the year

Received duringthe year on the

exercise of options

Otherchanges

during theyear


yearDirectors of Patties Foods LimitedOrdinary shares

Chris J Riordan 130,372 - - 130,372Gregory J Bourke 307,000 - 60,500 367,500Richard C Rijs 14,504,950 - - 14,504,950Henricus J Rijs 8,177,277 - - 8,177,277Gregory J Dhnaram 20,000 - 180,000 200,000J Curt Leonard 2,163,547 - - 2,163,547John Schmoll 90,000 - - 90,000Other key management personnel of the GroupOrdinary shares

M Knaap 114,839 - 4,186 119,025G Leyden 826 - - 826M Connolly 19,076 - - 19,076J Pentney 2,074 - (1,234) 840T Peters 8,000 - - 8,000M Kluver 11,901 - - 11,901

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28 Remuneration of auditor

entity,parentthe following fees were paid or payable for services provided by the auditor of theyearDuring theits related practices and non-related audit firms:

(a) Audit services

(i) PricewaterhouseCoopers Australian firmConsolidated

2013$

2012$

Audit and review of financial reports and other audit work under theCorporations Act 2001 198,500 217,500Other audit related services 11,500 7,500

Total remuneration for audit and other services 210,000 225,000

29 Commitments

(a) Capital commitments

Capital expenditure contracted for at the end of each reporting period but not recognised as liabilities is asfollows:


2012$'000

Property, plant and equipmentPayable:Within one year 2,413 1,945

(b) Lease commitments: Group as lesseeConsolidated

2013$'000

2012$'000

Representing:Non-cancellable operating leases 2,567 1,040

(i) Non-cancellable operating leasesThe Group leases various offices and warehouses under non cancellable operating leases expiring within one tofive years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of theleases are renegotiated.


2012$'000

Commitments for minimum lease payments in relation to non-cancellableoperating leases are payable as follows:Within one year 759 671Later than one year but not later than five years 1,808 369

2,567 1,040

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30 Related party transactions

(a) Parent entities

The parent entity and ultimate entity within the Group is Patties Foods Limited.

(b) Associates

32.Details of associates are set out in note

(c) Subsidiaries

31.Interests in subsidiaries are set out in note

(d) Transactions with other related parties

The following transactions occurred with related parties:

Consolidated2013

$2012

$Sales of goods and services

Sale of raw materials & finished goods to Davies Bakery Pty Ltd 1,351,605 918,702Royalties from Davies Bakery Pty Ltd - 35,000Rent from Davies Bakery Pty Ltd 54,978 120,326

1,406,583 1,074,028Purchases of goods and services with associates

Finished goods from Davies Bakery Pty Ltd (associated company) 15,346,953 16,237,650Air flight services from Piper Partners Pty Ltd (associated company) 183,853 134,902

15,530,806 16,372,552

SponsorshipRegional Business and Tourism Associations (common director) 53,303 63,235

Membership FeesAustralian Food and Grocery Council (common director) 27,332 27,332

Superannuation contributionsContributions to superannuation funds on behalf of employees 3,135,057 2,920,350

OtherConsultancy for manufacturing related services (Richard C Rijs) 25,000 -

(e) Outstanding balances arising from sales/purchases of goods and services

The following balances are outstanding at the end of the reporting period in relation to transactions with relatedparties:

Consolidated2013

$2012

$Current receivables (sales of goods and services)

Davies Bakery Pty Ltd 106,037 54,262Current payables (purchases of goods)

Davies Bakery Pty Ltd 2,019,081 4,585,355

There is no allowance account for impaired receivables in relation to any outstanding balances, and no expensehas been recognised in respect of impaired receivables due from related parties.

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30 (continued)Related party transactions

(f) Loans to/from related parties

other than loans to executives of up to $1,00030 June 2013There are no loans to directors or executives atunder standard terms of the Group's exempt employee share plan.

31 Subsidiaries

the assets, liabilities and results of the following principalincorporatefinancial statementsconsolidatedThe1(b):subsidiaries in accordance with the accounting policy described in note

Name of entityCountry of

incorporation Class of shares Equity holding2013

%2012

%Chef's Pride Pty Ltd Australia Ordinary 100 100Creative Gourmet Pty Ltd Australia Ordinary 100 100

32 Investments in associates

(a) Movements in carrying amountsConsolidated

2013$'000

2012$'000

Carrying amount at the beginning of the financial year 9,072 8,844Share of profits after income tax 1,715 1,128Dividends received/receivable (900) (900)Carrying amount at the end of the financial year 9,887 9,072

(b) Summarised financial information of associates

share of the results of its principal associates and its aggregated assets (including goodwill) andGroup'sTheliabilities are as follows:

Group's share of:OwnershipInterest %

Assets$'000

Liabilities$'000

Revenues$'000

Profit/(loss)$'000

2013Piper Partners Pty Ltd 50 179 227 92 (7)Davies Bakery Pty Ltd 50 14,713 5,320 22,141 1,722

14,892 5,547 22,233 1,715

2012Piper Partners Pty Ltd 50 192 226 68 (12)Davies Bakery Pty Ltd 50 14,125 5,502 19,652 1,140

14,317 5,728 19,720 1,128

All of the above associates are incorporated in Australia.

The above disclosures are based on the unaudited financial statements of Piper Partners Pty Ltd and auditedfinancial statements of Davies Bakery Pty Ltd.

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33 Reconciliation of profit after income tax to net cash inflow from operating activities

(a) Reconciliation to cash at the end of the year

Cash and cash equivalents as shown in the balance sheet is reconciled to cash at the end of the financial year asshown in the statement of cash flows as follows:


2012$'000

Cash and cash equivalents 68 151Bank overdraft (1,830) -Balance per statement of cash flows (1,762) 151

(b) Reconciliation of net cash inflow (outflow) from operating activities to profit (loss)Consolidated

2013$'000

2012$'000

Profit for the year 4,789 19,482Depreciation and amortisation 7,657 7,051Impairment of goodwill 11,817 -Fair value adjustment to derivatives 601 (387)Share of (profits)/losses of associates and joint venture partnership (1,716) (1,128)Transfer of interest income to Investing cash flows (41) (44)Change in operating assets and liabilities:

(Increase) decrease in trade debtors (2,285) (10,572)(Increase) in inventories (2,945) (7,032)(Increase) decrease in other operating assets 519 (79)(Decrease) increase in trade creditors 3,770 1,144(Decrease) increase in provision for income taxes payable (2,099) 299(Decrease) increase in deferred tax liabilities 47 (48)(Decrease) increase in other provisions 1,590 159Increase (decrease) in derivative financial instruments (860) 561

Net cash inflow (outflow) from operating activities 20,844 9,406

34 Earnings per share

(a) Basic earnings per shareConsolidated

2013Cents

2012Cents

Basic earnings per share from continuing operations attributable to the ordinaryequity holders of the company 3.4 14.0

(b) Diluted earnings per share

Diluted earnings per share from continuing operations attributable to the ordinaryequity holders of the company 3.4 13.8

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34 (continued)Earnings per share

(c) Reconciliation of earnings used in calculating earnings per shareConsolidated

2013$'000

2012$'000

Basic earnings per shareProfit from continuing operations 4,789 19,482

(d) Weighted average number of shares used as denominatorConsolidated

2013Number

2012Number

Weighted average number of ordinary shares used as the denominator incalculating basic earnings per share 139,065,639 138,989,223

Options and performance rights 640,280 2,208,036Weighted average number of ordinary and potential ordinary shares usedas the denominator in calculating diluted earnings per share 139,705,919 141,197,259

(e) Information on the classification of securities

(i) Options and performance rightsOptions and performance rights granted to employees under the Long-Term Incentive Plan are considered to bepotential ordinary shares and have been included in the determination of diluted earnings per share to the extentto which they are dilutive. The options and performance rights have not been included in the determination of

35.basic earnings per share. Details relating to the options and performance rights are set out in note

35 Share-based payments

(a) Long-Term Incentive Plan

The Long-Term Incentive Plan is designed to provide long term incentives for senior managers to deliverlong-term shareholder returns. Under the Plan, participants have been granted options or performance rightswhich only vest if certain performance standards are met. Participation in the Plan is at the Board's discretion andno individual has a contractual right to participate in the Plan or to receive any guaranteed benefits.The amount of options that will vest depends on the achievement of specified compound annual earnings pershare (EPS) growth. Once vested, the options remain exercisable for a period of four years in the case ofTranche One and three years in the case of Tranche Two. Options were granted under the Plan for noconsideration.Options granted under the Plan carry no dividend or voting rights.When exercisable, each option is convertible into one ordinary share.The exercise price of options is based on the weighted average price at which the Group's shares are traded onthe Australian Securities Exchange (ASX) during the period deemed appropriate by the Board.The amount of performance rights that will vest depends on the achievement of specified compound annualearnings per share (EPS) growth and the total shareholder returns of the Company against selected companieswithin the Consumer Staples (GICS) sector. The performance rights will vest on the anniversary dates of the 2tranches.Performance rights granted under the plan carry no dividend or voting rights.Each performance right is convertible into one ordinary share.There is nil exercise price on performance rights.

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35 (continued)Share-based payments

(a) (continued)Long-Term Incentive PlanSet out below are summaries of options and performance rights granted under the plan:

Grantdate

Expirydate

Exerciseprice

Balance atstart ofthe year

Grantedduring

the year

Exercisedduring

the year

Forfeitedduring

the year

Balanceat end ofthe year

Number Number Number Number Number

Consolidated - 20132 December 2009 2 December 2016 $0.90 1,500,000 - - (1,500,000) -27 January 2010 2 December 2016 $1.33 300,000 - - (300,000) -22 October 2010 2 December 2016 $1.36 150,000 - - (150,000) -3 September 2012 3 September 2015 - - 61,760 - - 61,7603 September 2012 3 September 2016 - - 247,040 - - 247,0403 September 2012 3 September 2015 - - 61,760 - - 61,7603 September 2012 3 September 2016 - - 247,040 - - 247,04022 November 2012 22 November 2015 - - 30,880 - - 30,88022 November 2012 22 November 2016 - - 123,520 - - 123,52022 November 2012 22 November 2015 - - 30,880 - - 30,88022 November 2012 22 November 2016 - - 123,520 - - 123,520Total 1,950,000 926,400 - (1,950,000) 926,400

Weighted average exercise price $1.00 - - $1.00 -

Consolidated - 20122 December 2009 2 December 2016 $0.90 3,000,000 - - (1,500,000) 1,500,00027 January 2010 2 December 2016 $1.33 600,000 - - (300,000) 300,00022 October 2010 2 December 2016 $1.36 150,000 - - - 150,000Total 3,750,000 - - (1,800,000) 1,950,000

Weighted average exercise price $0.99 - - $0.97 $1.00The weighted average remaining contractual life of performance rights outstanding at the end of the period was

- 4.43 years).(20123.05 years

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(a) (continued)Long-Term Incentive PlanFair value of performance rights granted

was30 June 2013The assessed fair value at grant date of performance rights granted during the year ended- nil). The fair value at grant date is independently determined using a binomial(2012between $0.70 and $1.43.

option pricing model and / or Monte Carlo simulation that takes into account the exercise price, the term of theoption, the impact of dilution, the share price at grant date and expected price volatility of the underlying share,the expected dividend yield and the risk free interest rate for the term of the option.

included:30 June 2013The model inputs for performance rights granted during the year ended

a) performance rights are granted for no consideration and vest based on achievement of specified compoundannual EPS growth. Performance rights vest on the second anniversary of the grant date in the case of TrancheOne options and the third anniversary in the case of Tranche Two.

- N/A)(2012(b) exercise price: N/A

- N/A)(2012(c) vesting date: Tranche 1 - 3 September 2014; Tranche 2 - 3 September 2015

- N/A)(2012(d) grant date: 3 September 2012 and 22 November 2012

- N/A)(2012(e) expiry date: N/A

- N/A)(2012(f) share price at grant date: 3 September 2012 - $1.60 and 22 November 2012 - $1.565

- N/A)(2012(g) expected price volatility of the Group's shares: 30%

- 5.5%)(2012(h) expected dividend yield: 5.5%

- N/A)(2012(i) risk free interest rate: 2.55%

The expected price volatility is based on the historic volatility (based on the remaining life of the options),adjusted for any expected changes to future volatility due to publicly available information.

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(b) Employee share scheme

An Exempt Employee Plan Offer under which shares may be issued by the Group to employees for no up frontcash consideration was established as part of the Initial Public Offer. There have been six rounds of the ExemptEmployee Plan Offer. The first round was conducted in November 2006 through to the sixth in September 2012.

A seventh round of the Exempt Employee Plan Offer is likely to be conducted in October 2013. Eligibleemployees will be granted Offer Shares (being approximately $1,000 worth of fully paid Offer Shares at themarket weighted offer price) in Patties Foods Limited. Successful Plan applicants would have their pre tax salaryor wages reduced by approximately $1,000 in equal installments, over a 12 month period.

Shares issued under the exempt employee plan offer may not be sold until the earlier of three years after issue orcessation of employment by the Group. During this period, the eligible employee will have legal ownership of theshares and all other rights (including dividend and voting rights), but may not sell, grant a security over orotherwise dispose of those shares. In all other respects the shares rank equally with other fully paid ordinaryshares on issue.

Eligible employees are all full time and part time employees as at the date the offer is made and are stillemployed at the date the shares are allocated. Casual employees are not eligible to participate.

The price of the shares is determined by the trading price of Patties Foods Limited shares on the AustralianSecurities Exchange for the five trading days immediately following the end of the offer period.

It is proposed that offers under the Exempt Employee Share Plan will be made annually. Salary or bonussacrifice arrangements, where applicable, will be entered into by the participants for a period of 12 months. Offerswill be up to $1,000 worth of shares.

(c) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee-$427,000) for the consolidated entity.(2012:2013benefit expense was $119,000 in

All other terms and conditions are consistent with the original announcement of the grant made on 22 November2012.

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36 Parent entity financial information

(a) Summary financial informationParent Entity

2013$'000

2012$'000

Balance sheetCurrent assets 111,669 105,939Non-current assets 154,441 163,590

Total assets 266,110 269,529

Current liabilities 69,287 62,040Non-current liabilities 73,824 78,366

Total liabilities 143,111 140,406

Net assets 122,999 129,123(368,997) (387,369)

Shareholders' equityContributed equity 68,571 68,443Reserves 6 (714)Retained earnings 54,422 61,394

122,999 129,123

Profit or loss for the year 3,592 19,288Cash flow hedges 858 (560)Income tax relating to components of other comprehensive income (256) 169

Other comprehensive income for the year, net of tax 602 (391)

Total comprehensive income 4,194 18,897

(b) Contingent liabilities of the parent entity

2012.30 Juneor30 June 2013entity did not have any contingent liabilities as atparentThe

(c) Contractual commitments for the acquisition of property, plant or equipment

the parent entity had contractual commitments for the acquisition of property, plant or2013,30 JuneAs at$1,945,000). These commitments are not recognised as liabilities as the(2012equipment totaling $2,413,000

relevant assets have not yet been received.

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PricewaterhouseCoopers, ABN 52 780 433 757Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au


Independent auditor’s report to the members ofPatties Foods Limited

Report on the financial reportWe have audited the accompanying financial report of Patties Foods Limited (the company), whichcomprises the balance sheet as at 30 June 2013, and the statement of comprehensive income,statement of changes in equity and statement of cash flows for the year ended on that date, a summaryof significant accounting policies, other explanatory notes and the directors’ declaration for the PattiesFoods Limited Group (the consolidated entity). The consolidated entity comprises the company andthe entities it controlled at the year's end or from time to time during the financial year ended 30 June2013.

Directors’ responsibility for the financial reportThe directors of the company are responsible for the preparation of the financial report that gives atrue and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal control as the directors determine is necessary to enable the preparation of thefinancial report that is free from material misstatement, whether due to fraud or error. In Note 1(a),the directors also state, in accordance with Accounting Standard AASB 101 Presentation of FinancialStatements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s responsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conductedour audit in accordance with Australian Auditing Standards. These Auditing Standards require that wecomply with relevant ethical requirements relating to audit engagements and plan and perform theaudit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial report. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial report, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial report in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the directors, as well asevaluating the overall presentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether itcontains any material inconsistencies with the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinions.F

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IndependenceIn conducting our audit, we have complied wiAct 2001.

Auditor’s opinionIn our opinion:

(a) the financial report ofincluding:

(i) giving a true and fair view of theposition as at 30 June 2013and

(ii) complying with Australian Accounting Standards (including the AustralianAccounting Interpretations) and the

(b) the financial report and notesas disclosed in Note 1

Report on the RemunerationWe have audited the remunerationended 30 June 2013. The directors of the company are responsible for the preparation andpresentation of the remuneration2001. Our responsibility is to econducted in accordance with Australian Auditing Standards.

Auditor’s opinionIn our opinion, the remunerationcomplies with section 300A of the

PricewaterhouseCoopers

John O’DonoghuePartner

In conducting our audit, we have complied with the independence requirements of the

the financial report of Patties Foods Limited is in accordance with the

giving a true and fair view of the company’s and the consolidated entity’s financialposition as at 30 June 2013 and of their performance for the

complying with Australian Accounting Standards (including the AustralianAccounting Interpretations) and the Corporations Regulations 2001

the financial report and notes also comply with International Financial Reporting Staas disclosed in Note 1.

emuneration Reportemuneration report included in pages 11 to 29 of the directors’ report for theThe directors of the company are responsible for the preparation and

emuneration report in accordance with section 300A of theOur responsibility is to express an opinion on the remuneration report, based on our audit

conducted in accordance with Australian Auditing Standards.

emuneration report of Patties Foods Limited for the yearection 300A of the Corporations Act 2001.

th the independence requirements of the Corporations

is in accordance with the Corporations Act 2001,

consolidated entity’s financialperformance for the year ended on that date;

complying with Australian Accounting Standards (including the Australianorations Regulations 2001; and

with International Financial Reporting Standards

directors’ report for the yearThe directors of the company are responsible for the preparation and

eport in accordance with section 300A of the Corporations Acteport, based on our audit

year ended 30 June 2013

Melbourne19 August 2013

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Patties Foods LimitedShareholder information

30 June 2013

2013.information set out below was applicable as at 31 JulyshareholderThe

A. Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

Range Total Holders Units% of Issued

Capital

1 - 1000 1,336 852,310 .61%1,001 - 5,000 2,357 6,190,451 4.45%5,001 - 10,000 746 5,737,441 4.13%10,001 - 100,000 639 15,856,396 11.40%100,001 - 9,999,999 62 110,429,041 79.41%

5,140 139,065,639 100.00%

B. Equity security holders

Twenty largest quoted equity security holdersThe names of the twenty largest holders of quoted equity securities are listed below:

Units % of Units

National Nominees Limited 33,942,206 24.41N&F Rijs Pty Ltd (N & F Rijs Family A/C) 10,625,348 7.64Aldakda Pty Ltd (Aldakda Family A/C) 9,893,512 7.11Hank Pty Ltd (Ankh Family A/C) 8,845,886 6.36Ludamon Pty Ltd (Marich Family A/C) 7,968,609 5.73JP Morgan Nominees Australia Ltd 6,945,750 4.99The Myer Family Investments Pty Ltd 5,000,000 3.60JP Morgan Nominees Australia Ltd (Cash Income A/C) 4,163,856 2.99Barr Family Pty Ltd <Barr Family Foundation A/C> 3,468,087 2.49HSBC Custody Nominees (Australia) Limited 2,677,151 1.93Mrs. Julie Ann Dennison 1,607,163 1.16Citicorp Nominees Pty Limited 1,496,639 1.08EMK Investments Pty Ltd 1,184,955 0.85Mr. Michael Thomas Bartholomew 1,182,323 0.85John Ernest Gleave 841,081 0.60UBS Wealth Management Australia Nominees Pty Ltd 655,636 0.47Bairnsdale Custodians Pty Ltd 600,773 0.43Mr. Thomas Frand Curnow & Mrs. Susan Elizabeth Curnow (Curnow Super FundA/C) 550,000 0.40Eightieth Corringle Pty Ltd 546,498 0.39Joe Rettino 534,020 0.38Totals: top 20 holders of issued capital 102,729,493 73.86

Total remaining holders balance 36,336,146 26.14

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Patties Foods LimitedShareholder information


C. Substantial holders

Substantial holders in the Group as per last notice disclosed to ASX are set out below:

Numberheld Percentage

Ordinary sharesThe Myer Family Company Pty Ltd 13,907,957 10.00%Adrian & Louise Rijs 11,951,051 8.59%N & F Rijs 11,693,958 8.41%Harry Rijs 9,245,886 6.65%Richard C Rijs 8,761,905 6.30%Aviva Investors Australia Limited 8,518,885 6.13%

D. Voting rights

The voting rights attaching to each class of equity securities are set out below:(a) Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote andupon a poll each share shall have one vote.

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Patties Foods Ltd ABN 62 007 157 182 - ASX · Patties Foods Ltd ABN 62 007 157 182 ... despite...

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